Petition for Writ of Certiorari — Utah Pie Co. v. Continental Baking Co.

Supreme Court brief1967

Ask Donna

What actually matters in this document.

Text

Se < oe

oe =

Citations to opinions below i shegvacnpsvesesess als et ats a '&

. Jurisdiction ..... eS Torre es cecivers sesccasees 8

Questions presented .......5...+0.. 000s Giicreiel Peer kee

“Oe. MN ch cthe \ctucess PR HORE ES

Statement ...... EN Bisssasenk Tuan dat aewedguRRAnks s 5

PCr re rerrr ry Tome hry lee Se

2. Petitioner's marketing ae SUSE Ae: 8

‘3. - Advertising allowances are not-price cuts ESO yea: b

4. ‘Respondents Lue ee tanae sheeae ‘bes KQecenebes cas eeeee, 10 Teen

ER. WRAP SEA Ee iy an, DRE HE one \

b. Pét's price discriminations cake iceaanak on pees, | aaa

_ ¢. Continental Baking. Company ...... mNeaactsnens Oe ee

d. Continental’s “Morton” BIB. ci cigs «tha wa baat. TO

e. ContinentaPs marketing system .......... Seeadeec ‘16

f. Continental engaged ih significant and sustained = _

price discrimination i in plaintiff's trading area . 18

@. Carmation .... ce ccapec gecesi ies Reesrecceevonen oe

h. Carnation’s price Wiosthaninatiied 2.56 (2.0 eta. Rs Ae

. 5. Respondents were motivated by. predatory intent .. 24 oe

a. Pet utilized a combination: of predatory tactics i in ‘A .

jts dealings in petitioner’s trading area...:.:..:.. 25

b. Continental intended to injure plaintiff . caibdt san ae

| c. The evidence showed Carnation’s predatory intent 29

6. Respondents’ price discriminations had an injurio

impact upon petitioner ...... idbak ss due wi eis iy. 31

a. Petitioner’s prices were driven down iS OPER Wasi ¢

b. Petitioner’s market share declined ........... Sats

7 8. The jury verdicts were well within the evidence. 34

. Reasons for granting the writ ........ owege'st Pe eeeeeee tees She )

foe Summary Seemann metittn ie Gens fener tianreahs ris 34

SRRRRIER «35 Virwskn os snccanseedss ists halite caeSemeunncke as @- >

1. Bivalccigll behtwseut sulting uve, partionlaspredinet tn

a a particular geographic area by large, diversified, na- =

* >: tional sellers showing overall profits is in and of itself* :

sufficient evidence of probable substantial — ee ©

FB:

; a

ins Respondents’ intent to injure petitioner would create a

¢ reasonable likelihood that their discriminations would *

"adversely affect competition ,:.. SS SdSsesebacaesbeas 42

. 38:- The Court of Appeals ignored the Significance of Pet's

4s industrial nee, pet PETE TRE TECTPT TT RTOTTE 43

hy 4. Pet’s contract with Safeway was a sieaik not only for ; eae

__two-price. system in a single market but also for a |

_°* geographic price discrimination .................... 43.

: 5.: The Court of Appeals ignored injurious aspects of the 7

w+. Pet-Safeway private label contract which it should have

-., considered .../.... Ecesv elena aaisneeeuhcakhnads x 45

6. The Court of Appeals daniel to examine Pet's

“cost justification” de novo’... ........ccceecceesce: 45.

_ 7. The inferences which the Court of ‘Anpieals drew from

-. post-complaint evidence would eliminate private trehle-

Patman Act, and all other. “incipiency” sections of the -

Clayton Act . jb sc Peveardcet Auseeeet oat. seas... 46

8. The Court of Appeals usurped the jury’s function. by

-. ruling out, as legally impermissible, inferences held

allowable in other eg, SRS EE nn UR ta 48 .

a.” The Court of Appeals’ holding that petitioner’s 1958 .

ee. market share “approached if in fact jt did not

¢ . amount ‘to a monopoly” conflicts with Maryland .

++ Baking Co. v. FTO, 243 F.2d 716 (4th Cir..1957) 48

bali b.,The Court of Appeals accepted ‘the testimony ” ae

rise ae two’ defense witnesses, apparently on the theory

that it was “uncontradicted”, in conflict with the °

Second Cireuit Fulé ...... be GCuB ES En dAD a ealeles o> 49

; 9. If Continental’s ‘Denver discriminations were aa before

' - the jury, Sse seta ‘be 8. new, srl, nat judgment

. for UNO a sins 5:5 Rice whan dcadinskianceecess 50

10. The action: of ‘the’ court below’ in reversing the jury.

‘verdict and judgment in favor of petitioners violates

.. the rule that resolution of questions of fact are for the

trier of fact and not an Appellate — peeusetccbar 51

S Conclusion rrawnws eeeseee: pukkeses eee te iereeseeeeeeeeces 53

Table of Authorities Cited

Alles Corp. v. pees Products, Ine., 329 F.2d 567 te Cir.

ADE). ssicdn ced cdvnQiewie Mh bench do Piwiabs Ceeday ed: 42

| American Tobacéo Co.. v. United States, 147 F.2d 93 (6th -

Cir. 1944), aff’d MONI WOE oiis oon oc 43

r Anderedn -v. Shipowners Association, 31 F.2d 539 (9th Cir:

; SE Riad ob tb 5 hea weak Wace d eek kee bance ukes aus AT

* Anheuser-Busch, Ine. v. FTC, 289 P. 2d 835 (7th Cir: _ 45

ay Automatic’ Canteen Co. v. FTC, 346. U.S. | rer res 6

. Balian Ice Cream Co: v. Arden Farms ‘Co., 281 F.2d 356 .

Ce SO EE. Sab ance bcnaveuna ke sacenubiierheeas ve 35

Borden Co. v. F.T.C., 389 F.2d 133 (5th Cin: 1964), cert.

granted .... U.S. SDOGRE THO, BUG oss icenccacsss 43

Broadcast Music v. Havana Madrid Restaurant Corp., 175

RS ae ee Ay I iin din a dp Ricco nie ccdan casa eixwis -- $8

Brown Shoe Co. v. United States, 370 US. Wen sictnnacic cor @

Dyer v. MacDongall, 201 F.2d 265 (2d Cir. 1952).......... - 60

pe Ellis v. Union Pacific Ry. Co., 329 U.S. 649 (1947)........ 52

, | Gunning v.. Cooley, 281-U.S. 90 (1980). Sc c<Kekens 51

Lavender v. Kurn, 327 U.S. 645 (1946)..............0005 =

Lessig v. Tidewater Oil Co., 327 F.2d 459 (9th Cir. 1964)..

Maryland Baking Co. v. FTC, 243 F.2d 716 (4th Cir. --

MIME) 5b ace seyessctinvespanbicssvcaegeenccbnensnss xe 38, 49

Moore v. Mead’s Fine Bread Co.,.348 U.S, 115............ 40

Poller v. Columbia Broadcasting System, 368 U.S. 464. ae ae

- Samuel H. Moss, Inc. v. FTC, 148 F.2d 378 (2d Cir. 1945) 45

' Sentilles v. Inter-Caribbean Shipping Corp.; 361 US. 107

SIMD ie Biksvice sy cvsdacebhie evens hakeassnnnessages 52

_ Sonnentheil v. ‘Christian Moeriein Brewing Ooi. 172 U.S. 401 50

. Stone v. New York, Chicago & St. Louis R: Co., 344 U.S.

EES wees Natl ko ccakdus nies access beuuebutahecia 52 -

‘Story Parchment Co. vy. Paterson Parchment enipa Co., 282

U.S. 555 (1931) dent Sig Siw ede dwbewedathicagevie ie

Swift & Co. v. ese nedsai 196 US, 375 5 (1906)... 37

iv « | a OF APTROMETINS Crrep

reo :

. Ténnant v. Peoria & P U. Ry. Co., 321 U.S. 29 (1943)...

<. Pages

..51, 52

Union Leader Corp. v. Newspapers of New. England, Ine. ie?

180 F.Supp. 125, injunction stricken 284 F.2d 582.

. A RO i ei EER I RK a. ; 47

United States v. Borden Co., 370. US. RD ies eee 46

’. United States v. General Blectrie Co:, 82. F Sapp. 153 (D.

NIE IG): ases sass edavsistadideestione. 4 See.

Weade v. Dichman, Writ & Pugh, 337 U.S. 801.......... 51

. Statutes

Clayton Act: :

Section 2 (38 Stat, 731, §2. (1914),)..5 Jevaan ee TN <5, 6, aT

‘Sections 3, 4. and 16 (38 Stat.. 731, §§3, 4 and 16 (1914), Seats

* 15 U.S.C. §§14, 15, 26 (1952) ) nut Me bab bdo bnce 5, 47

Robinsén-Patman Act, 49 Stat. 1526, §1 (1936), 15 USC." 4

GIR AIRY inci eck stn haved en

Sectign. 2(a) ..........ccceeeeeee bay 24,4, 7,358, 7

Sherman Act, Se ees ASS COIRNG DNR |» GREER Naar ape tne Sr 6

28 U.S.C., Section 1254(1) .........0.ceceee Leen teins 2

_. United States Constitution, Amendment VII ............. 5

\ x

“ ”

;

: as the Supreme Court

7 Anite States

Ocroser Term, 1965

No.

oo ede a v a ee rm ‘“

Utan Piz Company, 03 ’

Petitioner,

vs.

., ContinentTaL Bakine Company, CaRNATION

Company, and Per Mrix Comp: . PA 2

_ Respondents. }

"PETITION FOR A WRIT OF CERTIORARI

to the United States Court of Appeals

‘for the Tenth Circuit

Petitioner prays that a writ of certiorari issue. to review

. the judgment of the United States Court of Appeals for

: the Tenth Circuit, entered in the above-entitled case on.

: Mex 25, 1965.

’ CITATIONS TO OPINIONS BELOW |

The opinion of the United States Court of Appeals for

the Tenth Circuit is reported in-CCH 1965 Trade Cases,

par. 71,468. A copy.of the opinion is attached. hereto as

#£

; vy

' Appendix A. No opinions were ot by. the District a

prec e - JURISDICTION aie pee

ne The judignient, ‘of the United States Court’ of Aopiite

for the Tenth Circuit was entered on May 25, 1965. (R. 5).

The jurisdiction of this Court i is ‘invoked’ under 28 U.S. C.,

: Section 1254(1). ane

" QUESTIONS PRESENTED

The Court of Appeals- reversed a judgment entered

“ona jury verdict in favor of petitioner because it found

‘no evidence sufficient to support the jury’s. verdict that _

“respondents” price discriminations were reasonably likely ,

to substantially lessen. competition or to tend to create a

monopoly, within the meaning of Section 2(a) of the Rob-

inson-Patman Act. The undisputed facts showed :

a. That petitioner was a_ “small corporation, with

limited financial resources, engaged solely in the business |

of making fresh and frozen pies, which it sold in the inter- -

mountain area, where it had. the galy pie plant;

b. Respondents were all large corporations, each en-

- gaged in a variety of businesses’ of which its frozen pie

business was a small part;

C. Respondents | all had substantial resdurcés in | the i

form of multi-million dollar over-all profits ;

d. Respondents all: distributed frozen pies throughout

all or most of the United States ;

e. Respondents all sold substantial numbers of frozen

‘pies in the area in which they competed with petitioner

. ab prices below the prices which respondents charged for

_—pies of like grade and quality’ i in’ areas: ‘in which they did

man compete with petitioner; ce

ee Respondents had ‘net: losses on their “edles of frozen

- pies in the area ~ which ‘they did compete with petitioner ;

é. Prices in’ petitioner’s trading area fell and a

tioner’s market share declined. :

The questions presented are:

1. Are these facts alone sufficient to sustain a jury’s

verdict finding a reasonable likelihood of a substantial

_ lessening of competition or a tendency. to create a monop-

oly arising out of respondents’ price discriminations?

2. Are these facts sufficient to sustain the jury’s ver- .

dict if there is also evidence that there were 200 manu-

facturers of frozen pies in ‘the United States, but that only

petitioner and respondents made more than sporadic sales

in the area in which petitioner sold frozen pies?

3. Are these facts sufficient to sustain a jury’s verdict ee

if there is also evidence that each respondent’s price dis-

criminations were motivated by. preety: intent, directed

at petitioner? eae

4, Is evidence that a eels eased in advance

to take losses on frozen pie sales in the area in which it

competed with petitioner evidence of predatory intent? .

5. ‘Is evidence that a respondent indulged i in industrial abe

espionage to obtain information for use against petitioner |

evidence of predatory: intent? «

6. Is'evidence that a respondent’ 8 dhidcietudnors low

‘price in petitioner’s trading area cut substantially below

‘the lowest price level ‘¢ ever insoetstone: seen’ in that area 1

“ evidence of predatory intent? |

(fs Can. a difference ‘between a ‘inimintiietisbiae’ 's ‘price -

_ ” for. its proprietary, ‘‘name’? brand i in one . peographic area

"and the ‘manufacturer’s price for a substantially identical

“private label’? product in a different geographic ; area be

an unlayful- price discrimination under. Section . (a) of

_ the Robinson-Patman Act?

8. . Is diversion of business to the discriminating seller

the only criterion of competitive effect of a manufacturer’s

discriminatory price for.a “ private label”? product, or

-. should: the Court of Appeals also lave considered evi-

_ dence .of the impact of discriminatory prices for private

label products upon the ‘general’ Price level i in the market |

as a whole, and its probable ultimate effect upon the ‘s

structure: of the market? te inl

' 9. Did the Court of Aspenle, in overturning the jury’s _—

verdict, place unwarranted reliance upon post-complaint

_., evidence by ignoring the reasonable - inference that re-

dat spondents ameliorated their, pricing practices ses the

‘complaint i in: this action was. filed? oe

10.. Did the Coart of Appeals, in overturning the j jury 8

verdict, improperly xely upon the testimony of two inter-

“ested defense witnesses who petitioner contended were

‘lying, and whose credibility was a principal issue ‘in the

case. 4

\ .

11. Did the Court of Appeals, in overturning the jury’s

verdict, improperly treat an ‘advertising allowance’’ as a

‘‘discount’’ where the unequivocal testimony. of several

witnesses was Somes an advertizing allowance is ia es a price

out? 3

12)”. Could the ‘Court of Appéals properly @isregard the

evidence ‘of respondent Continental’s Denver price dis-

¢ijminations, on the grounds that the district "eourt’ 8

“charge did not submit ‘that issue to the jury, and then

-order entry .of : ‘Judgment in favor of Continental without ae

- a new trialt Hee ex a 3

13.° Did the Court of Appeals, i in overturaiaig the j j

- . verdict on grounds of insufficient . evidence, usurp se

‘function of the. jury, and deny petitioner’s constitutional -

‘right to-trial by jury, by failing to consider. the evidence

in the light most favorable to petitioner, and by failing to

give petitioner the benefit of- all reasonable inferences .

we from the ‘evidence so considered ?

" stAtUTES 1 INVOLVED

- The- -statutory provisions involved are Section 2 of the

“Clayton Act, 38 Stat. 731, §2 (1914), as amended by the

_ Robinson-Patman Act, 49 Stat. 1526, § 1 (1936), 15 U:S. C.

§ 13 (1952), and Sections 3, 4 and 16, of the Clayton Act,

' 38 Stat. 731, §§ 3, 4, and 46 (1914), 15 U.S.C. $414, 15, and -

26 (1952) ; U.S. Const. amend. VI. ‘These statutes are set |

out in Appendix C.

This was an action brought by petitioner against three

: competitors, respondents here,.to recover damages suf-

fered by petitioner as‘a result of respondents’ violations

of the antitrust laws. The jury brought i in verdicts finding

that each respondent had individually violated Section.2.

‘of the Clayton Act, to the-injury of petitioner in stated.

- 6

amounts (Tr. 1283-1284). This, then, is'a “primary line?”

price discrimination case.’ . pris

The Court of Appeals concluded (in 88-printed pages—

Appendix A ‘to this Petition) that the eyiderce was in-

sufficient to support the jury’s verdicts. /It ordered that -

judgment be entered for respondents without any further:

trial (R. 5). nish Suvand> aly

Before launching into its examination of the facts of

this case, the Court of Appeals stated its standard of

review as follows: : it Se re

‘ .

‘*Certain facts, if set out and considered in isolation, |

would present, a distorted picture of these cases. To

‘ get a true perspective-of them, ‘the whole factual pic-

ture and the relation of each. of the facts to each

'. other must be brought’ into proper focus. . . .’’ (App.

hie A, p. 3) igre kiphas..* ike ;

. . The Court of Appeals then proceeded to bring the facts

' of the case into what it. considered ‘to be. the *‘ proper di

‘focus.”’ !

The evidence relied upon by petitioner to sustain the

verdict showed the following facts: Rime Se

"The jury failed to find that respondents had conspired to fix

_ prices, and -had agreed.to try, by that means, to destroy peti-

tioner’s business in violation of tion 1 of the Sherman Act

(Tr: 1284). Petitiongs did not appeal that issue. . <= ©

The jury did find’ that’ petitioner had violated Section 2 of

the Clayton Act as- amended by the Robinson-Patman Act, to

’ the injury of respondent Continental Baking Company (herein-

. after ‘‘Continental’’) in the amount of one dollar (Tr. 1284).

The trial court entered judgment for petitioner n.ov., Continen-

tal appealed, and the Court of Appeals remand h instrue-

tions to grant petitioner a new. trial (R. 5). los pss ;

These matters are not.raised on this ape

ee |

' *

Petitioner Utah Pie Codeoaiay is a ‘Utah colnesediues

owned by the’ Rigby family of Salt Lake City. At the

time of. trial, it had been in business for some 30 years,

_ making fresh baked pies’ which it sold in Utah, Nevada,

Colorado, New Mexico and: Wyoming (Tr. 482). At the .

time, of trial, most of the operation of the business wibs -

in the hands of the younger generatioh of Rigbys—four ne

‘ young men, all of whom had started working in the plant _

part,time when they were, in grade school (Tr, 437, 442,

464, 465, 481). Of the 18 employees in the plant, 9 were

members of the Rigby family’ (Tr. 465). is

In about August of 1957, petitioner ' began freeniing: pies

_ as well as baking them (Tf. 483). In the ensuing four

fiscal. years, it sold frozen pies in the-states of Utah,

Idaho, Nevada, Wyoming, Montana, Colorado, Ue mas

Oregon and Washington (Pl. Ex. 82).

In 1958, petitioner opened a new pie plant (Tr. 1052)...’

_- It was a well-managed plant with an. advantageous loca-

spected petitioner’ s plant said that the production cp

machinery was satisfactory and that the plant was the |

~ cleanest he had ever been in (Tr. 455). Petitioner had the

‘, only pie manufacturing plant located in the intermountain

area (Tr. 141, 443). :

- Petitioner’ 8’ product throughout the periéd in contro- N |

versy. was a 24° ounce, 8 inch diameter, ‘ frozen. fruit pie

‘in the flavors apple, cherry, boysenberry, blueberry, pump-

kin and mince (Tr. 483, 784). A peach flavor. was added ~

fe in pale 1960 (PI. Ex. 4). Petitioner’s original brand

s “Utah Pie”’ ” (Tr an Later, dt added “Rrbst ’N '

5 ‘

e oy cd be oe

‘Flame,’ " ain was a “controlled label eS ‘es Manociated

“Grocers in Utah and Idaho but petitioner’ s brand else-

SS A . where, including Denvef (Tr. 509, 707). Petitioner also

<packed ‘‘Sonny~ Boy”’ for Roundup Grocers in Spokazie,

a ‘‘Mayfresh’’ label for American Food Stores in. Ogden,

_and some seasonal pumpkin and mince pies under the - .

““Bel Air”? label for Safeway (Tr. 473, 501, 663, 698).

The quality and efficiency of petitioner’s igen is

’ “best attested to by. a tw6-page ‘memorandum prepared by _

-Boyd £- Schenk, general manager of the Frozen Foods

Division of ‘respondent Pet Milk. Company (hereinafter.

A ““Pet?”) after a clandestine visit to ee: ~ _ (Pl.

Ex. 38). Schenk said; inter alia:

\ “Housekeeping and Sanitation —While’ the plant

was somewhat cluttered, acer i and sanitation

. appeared entirely satisfactory. . oa AE

“Gonclusion. —From a competitive point of. view

’ Utah Pie Company has the following advantages:

1. Low overhead due to ay management. -

con Non-Union labor force. | |

3. Freight "sdvantageyjnto intermountain markets

. ro ay

‘*AS far as the ete on is sbisiaiiind I

found very few. points where they would have a prob-.

- lem with Mr. Young. Some of these are quite easily

‘remedied and I. can see why this has been the first’. .

.. processor he felt ga? of producing for him in

" addition to ourselves. . hag (Pl. Ex. 38). sk

Ie asdente’ witnesses algo testified. that petitioner’ s

: pies were of high quality (Tr. 141, 876).

—_ . ¥ .

I aA RE i al ec

o ° ‘

Ge.

- te

2. Petitioner’ 8 5 Wearing Area. aa Se

_ Before it added its-line of frozen pies in 1957, petitioner

was selling fresh-baked pies in the states of Utah, Nevada, °

Colorado, New Mexico and Wyoming. (Tr. 482). During

the four years preceding the filing of the complaint i in: this

- action, petitioner sold frozen fruit pies in the states of

Utah, Idaho, Nevada, Wyoming, Montana, Colorado,

Colitorals, Oregon ‘and. Washington (Pl. Ex. 82). :

Dr, -Roice Anderson, the Utah State Professor retained

by the defendants. jointly as an economics expert (Tr.

1006), testified that Washington, Oregon, Montana, Wyo-

_ming and Denver, Colorado, were within the ‘‘relevant

“market”? of petitioner’s business (Tr. 1035-36).

Dr. ‘Anderson testified that he “would expect’’ -peti-

’ tioner to have most of the business in the immediate. area

of its plant (Tr. 1035). He further testified that it would

_. not be unusual if petitioner’s market share was zero in |

Fresno, California (where a Pet plant is located), or in

Frankfort, Michigan. (where another Pet Far is located)

(Tr. 1036-37 ). |

(8. Advertising Allowances Are Not Price Cuta.

In establishing respondents’ price discriminations, peti- |

| tioner compared their-net prices in petitioner’ s. trading

area with their net prices in other areas. In pricing pies,

‘respondents used list prices from which they made ‘‘off

invoice’’- discounts . (Tr. 131, 423-424). They also some-

times offered advertising allowances, in return for the

: purchaser’s obtaining advertising of thelr products (Id.).

Two of respondents’ officers testified to the effect that | |

“advertising” allowances are not ee cuts (Tr. 131, —"

ep. ! — _ e

The Court of Appeals nevertheless held:

‘Tn effect, the advertising allowance is a discount, ae

and fixes thé net per case price of the . ‘pies pur-

chased.”’ (App. A, p. 13).

As will appear hereinafter, petitioner’ 8 price compari-

‘sons do not always correspond to those of the Court of —

se Appeals, ‘since petitioner relied upon the evidence that

advertising allowances are not discounts, while the Court.

of, Appeals rejected it. ;

- inpiiinanls +

Respondents are all Delaware sbrparations with annual

sales in the hundreds of millions of dollars and profits in :

the millions of dollars (Pl. Ex. 31). Respondents Conti-*

- nental and Pet had national distribation of frozen fruit

-pies (Fr. 807, 230). Respondent farnation covered the

-; west, from approximately 1 the Mi ippi River (Tr. 427). ©

All respondents entered the frozey pie business by acquir-~ -

ing existing pie companies (Tr. 230, 342, 409). All sold

frozen fruit pies in the states wire petitioner did busi-

ness during each of the years covered by the "complaint

(Pl. Ex. 62).

In 1961, according to figures comlied a respondents”

_ economics expert, each respondent sold more frozen fruit

pies in the immediate area of Salt Lake City than did

all “‘other’’ sellers (i.e. not parties to. the. —, eom-

bined (PL. Ex. 62, p. = :

a Pet

_ Respondent Pet’s total net sales increased in every full

fiscal year covered by’ the damage ‘period of the case (PI. .

; . rs 2

Ex. 31). Its smallest net profit. before taxes in any. of those

"= years was in excess of $7 million (Id.). However, Pet con- ”

- .» Sistently lost-moriey on frozen pies —— the damage

Period of this case (Pl. Ex. 21).

Pet’s high-priced proprietary label is ‘‘ Pet- Ritz” lei 3

A, p. 8). Pet’s losses on Pet-Ritz in its Salt Lake Division .

were greater than ‘its losses elsewhere in 1958 and 1959;

‘information for.later periods was not-available (Tr. 189).

. Pet always planned. losses for Salt Lake (Pl.-Exs. 7A, 7B; .

Tr. 349). )

_ Pet’s marketing efforts i in “Salt Lake City (to say noth-.

ing of the rest of petitioner ’s trading area) were markedly

successful. In 1958, Pet had 16.4% of the total Salt Lake -

-” market (D. Ex. PA-35). In-1961, Pet had 29.4% of the °

total Salt Lake market, although its nearest plant. was .

hundreds of ‘miles away (Id.). In the yeal 1959, Pet sold

more frozen fruit pies in Salt Lake than any other*seller,

and had 35.5% of the total market (Id.). Pet’s share of

the advertised brand market (ie. other than private

labels) was even more pronounced; by 1961 Pet was easily

' the largest seller, with almost 38% of. the market (Pl. Ex.

96). PETE goths En ante wnt

Pet had easily the largest market share of the United

States’ ‘‘quality’’ frozen, pie market in 1958 and 1959

(Pl. Ex. 61). |

- After 1957, Pet a -three pie plants to. pure: the .

entire United States. ‘One was at Fresno, California,

another at Frankfort, Michigan, and the third at Cham-

bersburg,-Pennsylvania (Tr. 923-925):

Pet’s original ‘‘Pet-Ritz’’ product was an eight inch

.pié weighing 24 ounces. In- 1959, Pet introduced its 20

‘

;

' 12

_ ounce ‘‘Swiss Miss’’ pie which ‘‘. . . competes with... .

>. -

the economy pie factor of the market, and these generally

are the regional pie brands. . Py (Tr. 393).

Pet also packed “Bel Air” label pies for Safeway Stores. od

under a total requirements contract (Pl. Ex. 42). The Bel hae

Air pie is ‘“‘substantially the same product’’ as ‘the Pet-

Ritz pie (Tt. 355). Pet’s sales of Bel Air label pies began

in.1959 and continued through to the date of the complaint

/(D. Ex. PA-35; Tr. 1054). The Safeway Bel Air business --

"was highly important to Pet, amounting to 63,000 dozen. pee

pies (126,000 cases) in the- immediate Salt Lake City area

'- in the years 1959, 1960 and 1961 (D. Ex. PA-35). Safeway

‘was also the largest buying organization in Denver (Tr.

685). ?

“b. Pet's Price Discrimination. = d Best

Every Bel Air pie Pet sold to Safeway was sold at dis-

criminatory prices (Pl. Ex. 42). As the chart attached to

Pet’s Safeway contract demonstrated,. Pet was selling —

‘Safeway a Bel. Air pie ‘‘substantially the same product”’

(Tr. 355, 1252) as the Pet-Ritz pie at prices which.were_

always lower than the prices of the comparable’ Pet-Ritz - -

pies in the same markets (Pl. Ex. 42). The price differ- —

‘ences ranged as high.as $.77 per case ($1. 04 per donen)

in ‘petitioner’s trading area (Id.).—

Compare‘also the Court of Appeals’ table of the lowest .

San Francisco prices for Pet’s Pet-Ritz brand (App. A, ‘

p. 23) with the prices of Pet’s substantially identical Bel

Air. pie in Salt Lake City. on the same: ‘dates: (D. Ex. PA- ©

35, ?. 17). 7 f w ‘ etd,

Pet's only ; ae evidence of a i justification

_ for these price ‘differences covered only tie last five

— “ ® . : ‘~«@

months prior to the filing of the complaint (Pl. Exs. 43,

44). It thus does not cover the 1959 and 1960 sales. It is,

in form, a broad average of prices and costs over. a large

area and all flavors. of pies (Id.). It purports to justify a. =)

Price difference of no more than $.4980 per case ($.9960

per dozen), if believed, whereas the prices of Bel Air in —

Salt Lake were often-more ‘than a dollar a dozen less than

‘the prices of the comparable Pet-Ritz pies in other areas. ..

The Court: of Appeals nevertheless held uneqnivocally =

that ‘“‘the difference in cost justified the difference in

price” (App. A, p. 17).

Pet’s willingness to give Safeway wujusiifiahly- low

‘prices on Bel Air pies was undoubtedly the consideration —

which caused Safeway to make Pet. its exclusive supplier

_ of Bel Air pies. The exclusive-nature of the Safeway con-

tract based on flagrant discriminatiogg in price precluded

Lake and Denver where it had the ddvantages of con-

Utah Pie from competing for Safeway: business in Salt

venient location and low labor ok come which

- would have giver: it an. edge in competition with Pet’s

relatively disadvantageous location and high cost of oper-

ation (Pl, Ex. 38; Tr. 141, 143, 650). As Pet’s espionage

report on Utah Pie made clear, there were ‘‘very few

points where they [Utah Pie] would have a are

with Safeway (PI. Ex, 38).

Furthermore, the: chart attached to Pet? 'S Satowny’ con-

tract showéd on its face the price discriminations between

Pet-Ritz prices in various. marketing areas (Pl. Ex. 42).

It showed, for example, that while the Pet-Ritz price for-’

apple was $2.32 in California, it was $2.16 in Salt Lake

(Id.). It showed that while the —_ for Pet-Ritz cherry .

was $2.44 near Pet’s Caliternia plant, it was -$2.16 in

petitioner’ s trading area (Id.).

_ (Any doubt about whether Pet. actually made sales at

their quoted prices was dispelled by Pet’s invoices for

‘Northern California and for various places in petitioner’s |

trading area (Pl. Exs. 116-123). Pet’s. highest, lowest, and

median prices for each of the years covered by the com-

plaint were conipiled by respondents’ economics experts in

Pet. Ex. PA-35, based upon actual sales information ob-

tained from the principal wholesale houses in the —

Lake area (Tr. 7 Ai

Cc. Continental Baking Company. ,

Respondent Continental entered the nae food busi- :

ness by acquiring the Morton Packing Company on No- .

vember 30, 1955 (Tr. 227; Pl. Ex.:1). In the years 1958

through 1961, Continental had: total net sales in excess

. of one: and one half billion dollars (Pl. Ex. 31; Tr. 208-—

209). Its total net: profit before taxes was almost seventy-

five million dollars (Id.). By any index, Continental’s

‘‘Morton’’ was one of the two largest selling brands of

frozen pies in the United States (PL Ex. 61).

Continental’s ‘Morton’? brand was well known in Salt

Lake and.over the years covered by the complaint,’ Mor-

ton was a ‘“‘price leader’’, affecting the market price even

on small volume (Tr. -725-727). Its 1961. price cuts in

_ Salt Lake increased its volume 773% over the’average _

- of the three preceding years (See PA-35, pp. 2-5).

Continental’s gross sales of frozen. foods in certain —

western states (Regions Vil and VIII through 1960 and

W &!l thereafter—See bs _— were unggend in excess

of three million dollars for the years 1958 through 1961,

but there was a loss of $12,500 instead of a profit (PL.

Ex. 31). Hereford, General Accounting Manager of the

Morton Division. of Continental, identified respondent’s

. exhibits M-25 and M-26 which purport to show that Con--

__ tinental’s frozen pie sales in Utah and Idaho were profit- _

able (Tr. 586). ‘He testified, however, that if Continental’ 8

__costs had been allocated in those exhibits on the’ “same

as hesis which Continental used for its own internal pur-

' poses, there would be a loss (Tr. 589). Hereford testified

that if Continental’s whole business showed ‘‘gross prof- .

‘its’? like those in its pie Wii it would be pias

(Tr. 591).

d. Continental’s ‘*Morton’’ Pie.

Respondent Continental’s | ‘frozen fruit pies for sale —

throughout. the United States were made in just three

plants: Crozet, Virginia, Webster City, Iowa, and ( after

_ February 1961) by a ‘contract packer in Watsonville, Cali-

. fornia (Tr. 61, 97, 688; Pl. Ex. 18). Continental shipped

| frozen fruit pies long distances back and forth across the oe

continent from ‘time to time (Tr. 61, 220, 491; PL Ex.

18).

In 1961, Continental ¥ was selling a 99 ounce sainile xi pie in

Salt Lake for $2.55 per dozen (Tr. 86; Pl. Ex. 14). At.

ee same time it was offering Safeway a 24 ounce apple

pie at $3.10 per dozen (Tr. 86). The difference in the

cost of production was about 28 cents per dozen (Tr. 245).

Kitchin, Vice President in’ charge of Continental’ >

frozen pie production testified that 22. and 24 ounce pies 3

‘‘appear to look the same’’ (Tr. 245). He was corroborated _

- by Halverson, Morton’ s ee sales manager, who » .

agreed that the only difference in appearance was that the

22 ounce pan had a slightly sharper slant, not quite dis-

cernible to the eye (Tr. 621). There was testimony that

| . on the retail level most consumers cannot ‘tell ‘the differ-

, ence between a 20 ounce, a 22-ounce and a 24 ounce pie

(Tr. 785, 786), and Pet’s 20 ourice Swiss Miss. sold at

retail prices higher than those of heavier’ competing pies

_ (Tr..186, 639). Lighter pies also commanded prices equal

‘to or higher than heavier competing pies at wholesale .

‘(Tr. 740-741). In preparing his market share study re-

-spondents’ economics expert concluded that ‘“‘consumers. ~

buy pie. as pie and ‘not by- the, ounce”’ ‘Tr,’ 1021).

: Nevertheless, the Court of ‘Aagieds PP ygag in viewing

the prices of the 22 ounce Morton pie om ‘‘price-per-

ounce’’ basis (App. A, p. 37).

a at

¢. Continental’s Marketing System. ae

Continental refused to quote prices fu o.b. its plants; it

used a zone delivered price system with various deviations

between different Places within its zone (Tr. 671).

Continental - sold © its. Morton ‘frozen foods through

brokers. (Tr. 597). The brokers. were paid on a commis-

sion basis, based on sales volume, not profits ( Pl. mt 19).

Moreover, Halverson, Continental ’s_ sales manager re-

sponsible for dealing with brokers, was paid a bonus to

increase sales volume without regard to whether thé sales é

were at a,profit or ata loss, and he did not know whether

ae 2 ‘the sales he ‘made were priate to Continental or not

(Tr. 627). es | Sats ee

. - Continental’s broker in. Salt Lake as of the fall of 1960

\was Stanley Chapman :(PI. Ex. 19). He testified that he

was contacted by Halverson, western sales manager for .

Cantinental ‘‘about.two weeks, ten ‘days, it might have

been a week”’ (Tr. 125) after a telephone conversation °

in which he had told Gaylen Rigby, ‘petitioner’ s sales

manager; that ‘“‘he was going to obtain another frozen

Pie account, one that’ was a national brand; that he was

going to get . . Utah Pie.” (Tr. 124, 513). Halverson 2

placed the ae on which. he contacted Chapman as Oc-

_ tober 14, 1960 (Tr. 605). The letter by which Chapman,

. was appointed, however, showed that he had actually been’

eee hired by Morton on September 26, 1960, prior to that .

conversation, and Prior , to his threatening conversation

with Gaylen Rigby (Pl. Ex. 19).°

Chapman immediately asked is pas got, a special

promotional allowance (Tr. 130). About eight months

later, Continental took Chapman’s recommendation and

‘cut ‘its. apple price to $2.55 per ‘dozen, plus freight, “for

its Salt Lake customers (Tr. 131). At the time, Utah Pie .

apple was selling at $3.10 (Tr. 133). At the $2.55 price,

Continental was losing 45¢ per dozen on its direct costs

alone (D. Ex.M-9). EW

Nevertheless,, the Court: of Appeals accepted (and re-

printed as Appendix VI to its opinion) Continental’s ex-

hibit M-22, a graph purporting to show that Continental

was able i. Jay down apple pies in Salt Lake fo $2.80

per dozen (App. A, p. 84).

1. “Continental Engage in Signifean and Suiained Price Dieinine

‘tion in Plaintiff’s Trading Area. ~

pies in Salt Lake City (Pl. Ex. 110, PA-35). It did, how-

ever, sell substantial quantities throughout other import-

ant parts of petitioner’s trading area. (See Denver in-

Pl. Exs. 84-87; Oregon invoices, Pl. Ex. 88).

The most direct evidence of Ciiiiinental’é prices and

Fs °

Prior to 1961, Continental sold relatively few Morton s.

‘voices, ‘Pl. Exs. 77-80, 83 and 89; Washington invoices, —

volume is its invoices (Pl. -Exs. 10-14, 77-80, 84-89, 103).

From those invoices, the jury was entitled to observe not

only that Morton’s’ apple. price of $2.55,per dozen in Salt

Lake City in the summer of 1961 was far lower than any

price which any seller had. theretofore charged in Salt.

Lake (see PA-35) but that it. was $1.45 per dozen lower ~

than a contemporaneous sale of 1800 dozen apple pies ‘to

Fox Markets in) Los Angeles, California (Pl. Ex.. 10).

One-day prior to the sale to Fox Markets (at $4 per

dozen) Continental sold 550 dozen apple pies in Ogden,

si Utah for $2.59. per dozen and 25 dozen apple ve in

54 Seattle, for $3.50 per dozen (PL Ex. 10, 11, 12). . |

On J uly 20, 1961, Continental sold apple pies in Oak-

" and, California, at $3.76 per dozen (Pl. Ex. 13). Oakland —

is 90 to 100 miles from Continéntal’s Watsonville plant

(Tr. 69). Fight days later, Continental sold. 1,000 dozen

apple pies to Grocers Wholesale in Salt Lake at $2.55

‘per dozen, freight prepaid .( Pl. Ex. 14). Although Con-

tinental “bined testimony to the effect that the ‘‘PPD”’’

bcaneien on some of its $2.55 apple pie invoices were in

*‘erro} r,”?’ ‘At is undisputed that any Salt Lake buyer could

have a “pickap allowance”’ of 30 per dozen, resulting © 7

’ : | ° 19 tet

in a price of $2.55 f.0 b Watsonville California for Salt,

" Lake buyers (Tr. 580).

There were substantial and ‘continuing discriminations °

in the prices which Continental charged for its "Morton

pies in Denver, particularly after petitioner ’s initial suc-

cess in selling Frost ’N Flame pies there in ‘the fall of.

1959, From a price of $3.93. per dozen for apple in May,

1959, Continental’s Price descended to $3.65 per dozen

. ‘im December of the ‘same year, (Tr. 499; Pl. Ex. 89). In

February 1960, apple pie -was as low as $3.35 and jn —

October 1950, it was down to $3.20 (Id.). In June 1961,

Continental’s Morton apple pie went as low as $3.00 in

Denver (Id.). At that time, Morton apple pie was selling

for some $4.00 per dozen in Ips Angeles ( Pl. Ex. 10).

-* Idi anuary 1960, Morton apple pie produced i in Crozet,

Virginia, was selling at $3.35 per dozen in; Denver, freight

prepaid by the seller (Tr. 491; Pl. Ex. 83). At that time,

Continental’s Morton apple pie was ‘selling for $3.80 id

dozen in Virginia, where the plant was located (Id.)."

Some of the pies. which: ‘Continental sold in inte

were produced at its Crozet, Virginia, plant, others were

produced at its Webster City, Iowa, plant. Petitioner had

a freight advantage on sales in Denver over Continental

‘with, respect to Continental’s plants in —— Iowa —

and Virginia (Tr. 497).

Continéntal counsel initially objected to the atrodiae-

‘Aion of evidence on Denver sales of Morton pies on the

. ground that Denver was not properly: in the case. (Tr.

489). He then read into the record what purported to be

petitioner’ 8 answer, to an interrogatory (Tr. 490). After

a for petitioner — out that the giclee

Pee eee

pn had — oe: ener (Tr. 493), -‘Continental’s iiniuaat

niade his objection to.the Denver invoices on the grounds

that “TF. see no reason to burden the record with all these

invoices’? (Try 494). a

Petitioner introduced. webdnens: on. Continental’s frozen

. pie sales in’ Denver,- Oregon and ‘Washington (PL. Exs.

77-80, 83-89),: submitted damage exhibits claiming damage

‘for all of. those areas as’ against Continental (Pl. Exs.

' - 97, -98) and. argued the matter to the jury (Tr. 1161, Me a

1163).

' Petitioner’ > damage exhibits clearly claimed aia

he Joss of sales and-for depressed prices in the Denyer

market (Pl. Bx. 98): The trial court charged the jury .

that, in considering: -damages, “you may also oes .

~ exhibits which Mr. Caldwell [petitioner’s accountant

prepared: and which have been admitted into evidence. sal

(Tr. 1241). ‘6 ud sw

_ Nevertheless, the, Court of A peals held that’ petition- '

er’s judgment may not be sustained in any. part by ref- |

erence to the: nver market:

¢ . 4

PE: is a th clearly not submitted to ‘the jury by

tg court in its charge, nor passed on.by the Jury. +

ee Ae any SER . )

: Carnation entered the frozen pie business by acquiring

‘Mrs. Lee’s Pies” in 1955 (Tr.. 409.410). With that pur-

. chase, ‘Carnation acquired the ‘*Simple Simon” label and

_-Carnation’s Torrance plant (Tr. 409-410, 1105-1106). Car-:

. nation’s 8 inch frozen fruit pies were the same 24 ounce

: wet as petitioner’ 8 (Te. 1110).

. « 4

3 g

aan

aaa

a ee

y 3 4 : , e

Carnation was a large corporation with large financial

resources In 1958, its net sales aniounted to over $378

million (Pl. Ex. 31). Its total net sales increased in every

‘year covered by the damage period of the ease (Id.). Its _

smallest net profit before taxes in any of the years 1958- a

1960: was in excess of $18 million (Id.). However, in the

Pacific Northwest and Mountain States, where’ it com- .

‘ peted with petitioner, Carnation’s Frozen Foods Division 2

had net losses (on all frozen’ products, including pies)

before taxes in 1959, 1960 and 1961 (Id.). Ehe figures for |

1958 were not available (Id.).

Carnation puicing’ ‘was on:a. delivered basis, by zones .

‘(Tr 411, 1107). It did not offer pies on an f.o.b. plant

basis (Tr. 1107). Carnation did not maintain. the same

price within -its price zones; its price within zones varied

because of the ‘‘competitive situation’’ (Tr, 1083).

‘Carnation’ § sales of frozen fruit pies in the Salt Lake

| area in 1960 resulted in losses ranging up to $84 per. :

. dozen on a sales price averaging $3.04: per dozen (Pl.

Ex. 28). In the Salt Lake area,.Carnation’s frozen pies

generally. sold at a loss on A the years 1959, 1960

‘and 1961 (Id.).

During the same périod,. higerver; Carnation - showed .

-profits in its Frozen Food Division i in Northern California |

and the Western Division as: a whole (Pl. Ex. 22).

Carnation planned its losses in: the intermountain area |

‘in advance (Tr. 405-406; Pl. Ex. 5). Carnation’ ’s 1959 |

budgets forecast profits of $96,000 in Southern California,

$81,000 in Northern California and $3,300 for Arizona

(Tr: 406-407; Pl. Ex. 5). Carnation’s forecasts. for the. °

Pacific Northwest and Mountain States (the intermoun-

tain‘ area; Washington, Oregon, Montana, Utah and —

Aan ronrprmresshtae gperenas yang TNgY ~ aaa ineendaaemnnieneiida

een dot eee

~ Idaho) ; called for losses of $12,648 in the Mountahh States

. ‘and $13,299 for thé Pacific Northwest ee:

h. Carnation’ 8 ‘Price _Discriminations.

During the damage: ‘period of this case, i Boe con-

: sistently charged lower prices in plaintiff’s trading area

than the prices which it was charging in Northern Cali-.

fornia—an area of stable prices and consistent ‘profits,

o (The exhibits showing Carnation’s prices are Pl. Exs._»

}

CF) . se ’ |

‘In order to get its pies from Los Angeles to Salt Lake,

Carnation had transportation expense of $.35 per dozen,

64, '65, 66, and Carnation Exs. CB, “i C-D, nies ‘and

_/ plas about $.02 per dozen -in spoilage (Pl. Ex. 28). Car- ives

_ nation has’ combined these expenses in its own exhibit _

(Carnation Ex, C-U). In calculating Carnation’s price

discriminations,. however, petitioner has : disregarded

transportation and spoijage expenses and has simply ¢om-

pared Carnation’s actual prices as. | shown on its price lists

and as reduced by “off the face of the. invoice’’ price re-

“auction deals. | ae

- Carnation published price lists by zones (Tr. 411, 1087 ;

‘Pl. Exs. 64, 65, 66). The actual price paid ‘by Carnation’s

customers in petitioner’s trading area,fhowever, were

often determined by ‘‘off the face deals’? which reduced

listed priees ‘‘off ¢he face’’ 6f the invoices in particular

areas for designated periods of time (Tr. 422). Carna- . .

tion-also offered advertising allowances. The advertising °

' allowances were, however, ‘‘not price cuts’? (Tr. 424).

(But cf. opinion of the Court of Appeals, App. A, p. 13.)

Carnation’s largest selling flavor of pie in Salt: Lake

was apple (Pl Ex: 28, p. 2). The second largest selling

PS *

~e EN TRA Cy RE TREE A EO RR AE

oa amen sa tO a ~ -

‘eee was iis ( Id). In each of the years 1958 throngh

"1961, apple and cherry flavors ‘combined accounted for ° |

the bulk of Carnation’s ‘Salt Lake sales (Id.). is

~ "With respect ‘to ‘both apple and cherry flavors, Carna-

tion’s list prices were the same in San Francisco and

Salt Lake City for most. of the damage period. of the

ease; the discriminations were by way of. direct discounts

’ or rebates in petitioner’s ‘trading area:at times when San

‘Francisco purchasers were obtaining at most advertising

~ allowances, which dre “not price cuts.’ (See Pl. -Exs. 64,

65; D. Exs. C-B, C-C, C-D, C-E and C-F).

Although there were times when prices on ‘Carnation’ s.

apple and cherry were the same in San Franciseo-and. Salt

Lake City on‘a. -net, price basis, . there was never a price’

difference such that the low price was in San Francisco, ce

-although Carnation incurred substantially greater freight

costs. in shipping from Torrance, California, to Salt Lake

City; Utah, than it did in shipping from Torrance to San -

' Francisco., ( Pl. Exs. 64, 65;° D.. Exs. CB Co, C-D, C-E

C-F.) betas tg 1 y crs

* The persistence of Carnation’ s Salt’ “Lake pee ay

‘tions in the prices which is" charged for the two most .

important flavors of pie may ” represented in.tabular _ |

form as follows: tee”

Se. cl Dense Whe or 4

Price Was Lower in Price Was Lower in

; | ‘Salt Lake Northern California

1960 - Apple; 284 te

; * Qherry’ °° OTC; ae

1961* Apple “2. Js ss

“Cherry . 219 0

*251 days prior to filing of complaint. -

- 24

‘The Court of. Appeal, in its Agwpesiix Vu (as. in

. other. appendices to its opiriion) - purports to set forth

“absolute prices’ in conflict with the foregoing chart:

(App. A, pp. 20-24, 45-47).-The Court of Appeals’ Ap-

pendix VII, however, is expressly ‘based upon a defi-

nition of ‘absolute price’? i in conflict with the unequivocal:

testimony that an advertising allowance is ‘‘not a price

eat? (Tr. 131, 424.) The* Court of Appeals says:

_ “By ‘absolute price’ is meant the list price, less any 4

-. deals offered, whether direct discounts: from invoices —

or allowanies for advertising. és ’ (App. A, p. 46.)

‘The pattern of Carnation’ s pricing - in other parts of

petitioner’s trading area, and in other flavors, was simi- |

_ lar to that on apple and cherry in Salt Lake City; list”

_ prices in Denver, other parts of Colorado, Wyoming, and -

Spokane, Washington were not uncommonly the same as

- the prices in San Francisco. (Pl. Exs.: 64, 65; D. Exs. oa

— C-C,.C-E, C-F). However, the cash discounts from. list in

’ *Qetitioner’s ‘trading area; not matched in northern Cali-

fornia, conimonly produced lower net prices in petitioner’s

trading area than i in San Francisco, a city eloser to Car- .

nation’s plant ‘(Id.) At times, very substantial discrimi-

nations, adverse to petitioner, showed on the face of. Car-

meen * Chiorade: Wied price lists (Pl. Ex: %).

5, Bespondents Were | Motivated by Sreastery Intent.

Petitioner introduced evidence not only to prove re-

‘spondents’ price discriminations but also to prove that ©

those price discriminations were motivated by predatory

intent to hamper-and eliminate petitioner. as a competitor.

——

: Ser |

a Pet Uillaed » Combinatin of Prostory Tact ia Te Dealings

in. Petitioner’s Trading Area. . , :

Pets intent is best illustrated by its program of in-

tentional, . prolongef below-cost sales of frozen pies,

financed with money ‘‘borrowed ... . from our total cor-

porate operation.’’ (Tr. 932.) This practice was euphe- _

mistically referred to as “investment — (Tr. ~

351, 982.) : :

Pet? s ‘investment ‘spbnding” program was aimed in

part at petitioner, as. shown by a memorandum from Pet’s

files. Pet’s intermountain area sales manager stated,

under ‘‘Unfavorable Factors Affecting Results”, that

: “despite our steady growth generally there are factors |

at work that dig holes in our operation. Utah pies in the

- Salt Lake District are‘a constant ' ‘check’ on_our owt.”

(Pl. Ex. 37.) - pe ee

_ Pet also engaged in industrial espionage of * pplene s

plant as a part of its monopolistic program. At a crucial ©

- moment in the negotiations for. ‘Safeway’s Bel Air busi-

ness; Schenk, the ——s Manager of. ore Frozen Foods

| and. prepared a report -on his Aidt: (PI. Ex. 38; Tr.

833 et seq.) The report was addressed to Dittman, con- :

tract sales manager for Pet (Pl. Ex. 38; Tr. 841, 857). .

The report was to be used by Dittman in disparaging pe- _

- titioner to Safeway (Tr. 843-844). Copies of: the report |

‘were circulated: to L. -G. Leutwiler, vice-president. of _

. production of Pet’s Milk. Products Division ; Gordon Ellis,

. President of Pet’s Milk Products Division and §. P. Har-

ter, Pet’s Senior Vice-President aie Ex. 38, Tr. a.

'- Subsequently, Pet got the Safeway. business (at a dis-

eriminatory price) and petitioner lost out (Tr. 504; Pl.

~~ Ex. 42). Petitioner’s sales manager testified that he had

actually been promised some Safeway Bel Air business

two days after Schenk’s clandestine visit to petitioner’s

plant (Tr. 501-504). Young, ‘the Safeway buyer denied

that he had ever promised to give petitioner the Bel Air

business, and explained that he was dissatisfied with pe-

- titioner’s- quality control (Tr. 1054).

wo Young, the Safeway buyer, also denied ‘that any rep-

.. resentative of respondent Pet had ever talked to him

‘ about conditions within petitioner’s plant (Tr. 1053).

However, ‘‘lack of. technical quality control personnel”’

_.was one of the “‘points you might use”’ listed in Pet’s |

_ espionage memorandum compiled for its Safeway con-

tract negotiator (Pl. Ex. 38, p. 2). On the other hand,

‘there was testimony that a Safeway quality control man

who had inspected petitioner’s plant had said that it was

the cleanest he had ever been in (Tr. 455).

' Faced with this conflicting erate the Contr of Ap- |

peals | said:

‘SOF course, ‘Pets sinha was nniieaiai: ond i }

not to be condoned. However, the information, con- -

tained in Dittman’s*report was never conveyed to

Safeway personnel. Dittman so testified, and so did

Young, Safeway’s buyer. It’ thus appears that, the

Dittman report was never used by Pet in its com-

‘ - petitive efforts with Utah Pie.’’ (App. A, p. 30.)

It should be noted that the Court of Appeals has thus

> accepted and ‘relied | upon witnesses ‘whose veracity was

called into question by petitioner’ s counsel = 1148-

27 ;

‘sik : | ie

1154). And. Pet counsel reinforced that question of

veracity at the outset of his summation:

- ‘Mr. Lamb: May it please _ Court, ladies and

' gentlemen of the jury:

“In my entire 30 years of law practice, I have

never had one of my witnesses accused of being a

liar. Three of my witnesses“‘were accused by the

opposition of being a liar—the head buyer for the

Safeway Stores, the president of the Milk Products

Division of Pet Milk Company, Mr. Dittman, ‘chief

contract officer for the Pet Milk aie be ?? (Tr.

1198).

Although Young, the Safeway buyer, ‘was not employed —

by a party, there was evidence that his interest might

be greater than-appeared at first blush. A Pet internal -

memorandum, Pl. Ex. 47, said in part ‘‘. . . Young will

act as a door opener for our saies’people. . . .”” The memo

went on to say “‘. . . Young ‘will encourage the Safeway

Sales Division to stock Pet-Ritz. flavors of 8” Fruit Pies

that.are packed under the Bel Air label, particularly with

_. those divisions that are currently stocking a pie that

competes with Pet-Ritz,-both in quality and price. Young

will send me a blind copy of the letter that goes to each

Safeway Division, with the. understanding our men are |

not to quote this letter. ”? (Pl. Ex. 47.) Young’s testimony ©

on these subjects certainly puts ‘the veracity of everyone

involved i in issue (See Tr. 1057-1059).

The espionage incident not only demonstrates Pet’s

predatory intent; but also undermines the conclusion of

the Court of Appeals that ‘‘it was.clearly established by

. uncontradicted, uncontroverted evidence that. Safeway

was not willing... to siledicte: shinee. fruit pies from

Utah Pie, for the reasen that it was unable to persuade

Utah, Pie to install means and procedures that would in-. —

sure uniform quality....’’ (App. A, p. 26.) -_

- There ,was further conflict in the. evidence on the.

: quality-control issue; petitioner’ 8 plant engineer testified

in substance that Safeway was satisfied with petitioner’s

quality: control for: several years, and that the. quality

control was really only.a ‘‘. . . bunch of paper ‘work, which

didn’t make any differénee. in the pie that ran through

_ the machinery, except they wanted .to know what we ran,

. ‘when we ran it.”’ (Tr. 451.)

Industrial ‘espionage was not the only predatory device

Pet used in competing with petitioner. Another predatory

tactic which Pet employed was its *‘fighting . brand’’,

Swiss Miss. The Swiss Miss Pie was 4 ounces lighter than

the Pet-RitZ and Bel Air brands, and sold at substan-

tially lower prices (Pet: Ex. PA-35). However, since the

public ordinarily can’t tell the difference between various -

- weights of 8 inch pies (Tr. 785, 1021), Pet was able to sell

large quantities of its underweight Swiss Miss to unsus-

pecting buyers. The purpose of the Swiss Miss was to

a meet price competition without endangering the

consumer concept of Pet-Ritz quality” (Tr. 396; Pl. Ex.

61). The ‘‘price competition’? which. Pet had in mind

‘ was ‘*... the economy pie factor of the market, and these

iinile are the, regional pie brands. . . .”? (Tr.°939.)

‘Pet employed Swiss Miss in Salt Lake with a vengeance;

although Pet-Ritz had larger sales Volume than Swiss .

‘Miss nationally, Swiss Miss outsold Pet-Ritz: almost 13 i

to 1 in Salt. Lake in 1961 (Pet Ex. PA-35). ieee

° Mike ant >

ere 4

29 °

Finally, Pet’s price discriminations themselves were

highly significant evidence of predatory motive. As Dr.

Anderson, respondents’ economics expert, put it, Pet’s

lower prices at points more distant from its plant were —

“‘unnatural’’ (Tr. 1046). They were evidence of predatory

Pricing as ‘Cone of the possibilities’’ (Tr. foe

b. Oontinental Intended to Injure Plaintif

That Continental’s discriminatory tier prices were -

‘aimed directly at the petitioner admits of no doubt what- —

ever. Morton’s vice-president in charge of production,

"admitted it on the stand (Tr.-71, 100). So did Morton’s

regional sales manager; he had said that Morton’s lowest

price in Salt Lake ‘‘was aimed at. him [petitioner] as @ .

competitor to get business in his customers’ account’? «

ae (Tr. 615). Bok

Continental ’s $2.55 price fora dozen apple pies in June -

of 1961 was below even the bare cost of production (PL

. . Ex. 29).-It was the lowest price which ‘had ever been seen

in the Utah market’ (D. Ex. -PA-35). Making allowances for -

Continental’s other costs, there were losses continuously

from late 1958 on Continental’s frozen pie sales in the

‘Salt Lake area (Pl. Ex. 29; see, also Tr. 105, (199, 588,

- 589, 615, 616). ye A

c. - The Evidence Showed: ‘Carnation’s Predatory” In

‘Carnation sold its frozen pies in Aone s tnding

area at prices below its cost (PI. Exs. 22, 26, 28).

planned those losses in advance (PL Ex. 5). In the years

1959, 1960 and 1961, Carnation’ s Frozen Foods’ Division

~ lost $141,413 in the Pacific Northwest..and Mountain...

" States (ie. petitioner’ s trading area) but made $252,554

‘

’ 30 |

in Northern California (Pl. Ex. 29). During those same .

thrée years, Carnation’s overall profits before taxes were,

ioe Ca (PL Ex. 31).

6 tion I

Petitioner’s Trading Area -

Year ; Loss

\ sa 2 Uae ;

\ 1959 $16,547

\ 1960 ' =~. 78,245

‘ . 1961 * 46,621

_'. Dr. Anderson, respondents’ economics expert, testified |

that sales by a large corporation at a loss in a regional

market, where that loss was planned. in advance, would be .

evidence of some ulterior motive (Tr. 1040-1041). He also

. testified that if a company sold at lower prices 750 miles -

' from its plant than it did at the plant door that it indi-

-eated ‘‘less than perfect ‘pricing’? and was ‘unnatural’? -

(Tr. 1046). He further testified that the price decline in

petition er’s \ trading area might have been the result of

: predatory pricing as ‘‘one ‘of the possibilities’? (Tr. nt

Carnation’s long-continued losses i in Salt Lake were not

a result of any inadvertence or) of any random, ad hoc,

deviation from non-discriminatofy pricing’to meet sudden

‘or transitory circumstances. They were the result of a

carefully calculated zone pricing system controlled directly .

from the highest policy levels of Carnation—a committee

of the Board of Directors (Tr. 1102, 1107). Ser?

The Court of Appenls passed over all this evidence. . -

smoothly :

‘See times during the period 1958 to 1961, Carna- —

- tion’ 8 peneee, in the Utah Area were ) mene. ‘than those

‘Le

_- charged in the Los Angeles: area and at times they

* were lower. There was no relationship between the

prices in the two areas. The price in each was de-

termined by local competitive conditions. i (App. A,

p. 42.)

6. Respondents’ Price Dveriminatons Had an Inurious Impact

- Upon Petitioner, ~

' Petitioner claimed damages for injuries of three sorts:

(1) loss of profits due to depressed prices; (2) loss of —

profits due to reduced volume; and (3) injury to the good

'. will value of its business (Pl. Ex.°95). Petitioner dém-

: onstrated that respondents’ activities-had driven prices:

' down sharply in the period after petitioner entered the .

business (See Pl. Exs. 4, 62; Pet Ex. PA-35). Petitioner

demonstrated that in spite of its uniquely advantageous

location, its high quality product and its: modern and

- efficient plant its market share had diminished dras-

tically. (Pl. Ex. 96). Petitioner’s unchallenged testimony

also proved a diminution in the -Bo0d will value of its

- business of $75, 000 ) (Tr: 522).

a. Potitioser’s Prices Wate Driven Down: a”

The decline in prices which petitioner was able to ie |

for its pies is clearly’ demonstrated for the immediate

Salt. Lake area by the study prepared by Dr. Anderson,

respondents’ economics expert (PA-35, pp. 8, 9). His -

study shows a decline in the average price Which pe-

titioner received for Utah brand-apple pie from $2.15 per

case ($4.30 per dozen) in February of 1958 to $1.60 ‘per

case ($3.20 per dozen) in- August of 1961 '(PA-35, PP.

8-9, ‘‘price’’), a decline of about wile ?

The picture tes petitioner’ 8 entire rer area was

very similar to that shown by Dr. Anderson’ Ss more lim-

ited study of the Salt Lake-Boise area (See Pl. Ex. 4).

Petitioners presented $0" the jury damage charts set-

ting forth ‘the amounts of damages which they asked ‘the

jury to find, predicated upon the jury’s determining

prices which would have prevailed in plaintiff’s trading

area but for respondents’ price discriminations (Pl. Exs.

96, 97, 98, 101).

There was ample evidence from which the jury might

have. reasonably concluded that the declining price levels

in’ petitioner’s trading area were due to respondents”

‘price diseriminations, and that all price levels would have

been substantially higher in the absence of those dis-

criminations. In the first place, the jury could consider

- what respondents were charging in their areas of dis-

__ eamaany high prices. ~ , ia

- There was. also: direct testimony by a defense witness

that in the absence of respondents’ price reductions, the

price level in the market would have stayed above $3.70:

_ Q, Now, Mr. Degenhardt, assume for me, if you

. will, that none of the three defendants’ prices had

‘. ghanged in the Salt Lake City market from 1957 on,

~ that they stood at the ’57 price; would the price level

in the market have Layee at $3.70 or above per

dozen? =.

A. f would say 80, yes.”’ (Tr. re

b. Petitioner's Market Share Declined.

In. addition to damages resulting from an erosion of

the’ prices which it was able to obtain for. its. products,

petitioner suffered a very substantial los§ of business.

Petitioner ’s share of the market for ‘‘advertised”’

brand pies (i.e. other than private label) declined dra-

matically from 1958 to 1961 (Pl. Ex. 96). Starting with

70.41% of petitioner’s and respondents’ total sales in

1958, Utah Pie dropped steadily each year to 33.64% in

1961, ( Id.). By contrast, every one of the respondents’ —

shares increased; Pet moved up steadily from 17.32% in

(1958 to 37.94% (and the-largest seller pet advertised

brands, i in the market) in 1961 (Id.).

Shown: graphically, petitioner’ s market share in the

immediate Salt Lake City area for its advertised brand

was as Semete:

1968: \ 70.41%

1959 ee

100 © ee : 40.28

1961 . . : 33.64

. (Source: Pl. Ex. 96.) aly

Considering sales of all brands in the market, including —

private label and sellers ‘‘other’’ than parties to the law-

suit, petitioner’s market share was as follows:

Utah Pie - ee

- 1958 ie hag

"1959 as ., * AR

1960 | 46% |

1961 : 45% =.

(Computed. writes Pl. ‘Ex. 62.)

Halgren, a Vice President of. Carnation, testified :

{Increasing distribution doesn’t necessarily mean .

increasing sales, and it doesn t mean by any means ~

34°

. that you are keeping pace with the market. Some- ”

times the market grows from 100,000 to 200,000:

- cases in a single year. If you don’t grow with that,

you are not getting your share.’’ (Tr. 1120; emphasis.

added.) ne.

Cc. The Jury Verdicts Were Well ‘Within the Evidence.

Petitioner’ s damage calculations as to Pet would have

supported a verdict for $261,046 actual damages (Pl. Ex.

95). In fact, the jury returned a verdict of $44,197, well

within the\ damages® shown ~ the evidence against Pet

(Tr, 39). -

a. ' Petitioner’s damage saltaiadbons would have ciate

a verdict of $381,197 against Continental . (Pl. Ex. 95).

In fact, the jury returned a verdict of $24,994 (Tr. 39).

Petitioner’s damage calculations would have supported . '

a verdict for $98,892 against Carnation (Pl. Ex. 95). In . aos

fact, the jury returned a verdict of ‘$29,277 (Tr. 39). ?

1. Se

REASONS FOR GRANTING THE WRIT -~

? SUMMARY soa

By holding, as a matter of law, that the evidence in this

case was insafficient to sustain a jury verdict for. peti- —

‘tioner in a ‘primary line’’ price discrifnination case, the.

3 Court of Appeals has effectively repealed Section 2(a)

of the Robinson-Patman Act, insofar as it might other-

. wise protect. competitors of a price-discriminating seller.

The basic, indisputable facts provide ample foundation —

. for the jury’s conclusion that respondents’ regional price-

cutting was likely to substantially lessen. competition, and

~ that it posed a dangerous threat - moriopoly. There _,

ys ws See

POET, ae tet eee Raat Pde : IRL

ie —- SD as TR a x se She, 2S et “$2 = > Rat ct ee +e

in addition, ample evidence’ that ‘respondents’. regional - Re

‘price-cutting injured petitioner in amounts «at least ‘as

great as the. jury 8. damage verdicts.

‘The Court of Appeals nevertheless held, : as a matter of |

a law, that petitioner’ ~ evidence. was insufficient to sustain

-the- -jury’s finding of a reasonable likelihood of a: substan- |

tial lessening. of competition, or of a tendency to create a

monopoly (App. A, _ Pp- 57, 62-63, 69, 68-69).

This holding strikes down, as unreasonable and im- -

permissible, inferences which are not*enly reasonable but Z * :

well-nigh inescapable, * as has, been suggested by much —

‘prior precedent. The opinion of the Court of Appeals

creates a precedent upon which large, well financed cor- _

porations may henceforth rely ‘to justify their ““invest-

ment spending” (Tr. 351, 932) in monopoly, to’ be. ob-

_ tained by prolonged below-cost selling, at discriminatory »

" prices, in the — areas of small, — com-

petitors. :

This case: goes far ane Bolian Ice aii Co. v. -

' Arden Farms Co., 231 F.2d 356: (9th Cir. 1955), relied

_ upon by the Court, for in -Balian the ihgtiry Was: whether *

the evidence suppofted a judgment jh the trial court for

_ the defendant. ‘This decision, if ‘itlents ed, must: remain.

8 dangerous anomaly in the law, confusingly conflicting *

with well considered opinions of othér Circuits and of this

Court, and an open invitation to predatory price-cutting Me

as a means of. expanding monopoly power. ae Ne Pe

~The indisputable facts of the case are these:

' Petitioner had the only pie plant in the intermountain

area. Lisi 141, 443). —— petitioner had been i in the :

fresh pie business for-many years, its principal product)

_ during the relevant period was frozen pies (Tr. 482-483).

* Petitioner’s financial resources were comparatively noii-

nal (Pl. Ex. 92). > | L—

Respondents, were all large corporations, engaged in’

many diverse lines of endeavor, with great financial re-

sources in the fotm of mufti-million dollar profits’ from

, their over-all operations (Pl. Ex. 31). Each of the re-

Spondents sold frozen pies in petitioner’ s trading area.

~ at: discriminatory | prices resulting in losses on‘those sales

for protracted. periods of several 4 years (Pl. ‘Exs. 9D, 7, 21,

~ 22, B, heal pe A 405-406). | :

Over the period of respondents’. discriminatory “pricing

in petitioner’ s trading area, prices steadily declined, and 7

petitioner’s market share fell precipitously (Pl. Ex. 96).

——- there were about 200. frozen pie manufacturers

in the United States, none ‘of them, other than petitioner

and respondents, made more than a sporadic appearance .

in Salt Lake City (Pl. Ex.-62,. p. 5). Respondents’ pies

‘sold in petitioner’s trading area were made, variously, in

Towa, California and — (Tr. 923- 925, 61, 97, 688;

Pl. Ex: 18). |

Nevertheless, . the Court. of ‘Anges ei and re-.

-‘manded with instructions to enter judgment for respond:

ents, without further trial (App. A, p. 74).

The decision of the Court of \Appeals was tibsedl 1 upon

its conclusion tHat none of-the respondents ‘‘.-. . by price

" differences or other acts, had substantially beasianaa com- ’

- petition, ¢ or teintied to create a monopoly, or injured, de-

' stroyed, or prevented competition -with it in the Salt Lake

City market, or that’ there was a reasonable . possibility .

_ that [respondent], by price differences or other acts,

- would do so in the future . ae (App. A, 62, 65, and. 69).

- This conclusion i is not just wrong. It creates a danger-

ous precedent in the light of the ‘undisputed facts, since

the Court of Appeals purported to consider the facts and

inferences in the light best calculated to sustain the ver-

dict... If the basic, indisputable facts of this case won’t

eupeicnt a verdict, then Section 2(a). of the’ Robinson- ©

Patman Act is a dead letter i in primary-line cases.

But even if additional facts might be required before

the jury coyld be permitted to infer that. respondents’

_ discriminations were likely to lessen competition or tended

to monopoly, those additional facts are in the. record.

There is substantial evidence that each respondent planned

and intended to injure petitioner and to hamper its ability

to compete. (See STATEMENT, supra.) This evidence

of predatory intent, together with the other facts met-

tioned above, provides a firm basis for the jury’s finding, ©

for intent carries with it the dangerous. possibility of

success. Swift & Co. v. United ies 196 U.S. 375

(1905).

_ The Court of Appeals’ massive sitet, sien in

its peremptory order to the district court to forthwith —

enter judgment for _Tespondents, is based upon a series

of mistakes of law, . ‘at least two of which put it in direct

conflict with other Circuits. tt ar

First of all, the-Court of Appeals failed to treat sissies

2(a) of. the Robinson-Patman Act as an ““ineipiency’? stat-

ute, designed to outlaw discriminations which are likely to

sas

injure competition if permitted to continue. “Instead, the

Court of Appeals relied upon /post-complaint evidence

‘which showed that (as of the date of trial): petitioner had |

_not been bankrupted. This interpretation of the statute

would permit a price-discriminating seller to avoid all

liability under section 2(a)- by modifying its conduct

promptly when sued. This interpretation conflicts with

decision’ of other circuits holding that cessation of anti-

trust violation does not insulate the wrongdoer.

_ The Court’ s conclusion that petitioner’s 1958 market

share of 66.5% in Salt Lake City ‘‘approached, if it did

not in fact amount to a monopoly’’ (App. A, p.:69), is’

in flat conflict with the decision of the Fourth Circuit in

the case of Maryland Baking Co. v. FTC, 243 F.2d 716

(4th Cir. 1957). ( There, the small, regional competitor’s

market share started at 91.3% and fell to 58.2%.)

The Court of Appeals relied upon two defense wit-

nesses’ testimony to upset the jury verdict; apparently on

the basis that their testimony was ‘‘uncontradicted.”’

- However, the credibility of both witnesses was a major

issue in the case, and the Tenth Circuit’s decision to

accept ‘and rely upon the questioned testimony put it in

direct conflict with a long line of Second Circuit cases such

as Broadcast Music v. Havana Madrid Restaurant Corp’, a

175 F.2d 77 (2a Cir. 1949), holding that even an ‘uncon-

tradicted witness may. be totally disbelieved...

In considering the impact. of respondent Pet’s dis-

criminatory pricing of the Bel Air private label sales to-

Safeway Stores, the Court of Appeals has committed sev-

eral serious errors of law. It has disregarded the re-

hs rdw nau Sebel

99.

gional price discrimination made possible by Pet’s two-

brand selling. In considering only the question of whether

or not petitioner lost sales to Pet, the Court of Appeals

- has disregarded the serious competitive ‘impact of private

label selling upon both the structure of the market-place

and the prices received by all sellers in the market as a

consequence. ‘It has also chosen to find that Pet’s private

. label price was ‘‘cost justified’’ although the evidence Was: »

equivocal, and the jury thought differently. _

In the course of its opinion supporting its eotichusion

that the judgment of the district court should be ‘re-. -

versed, the Court of Appeals has expressly rejected many

inferences | and ignored er minimized many facts upon

which: petitioners relied to support the verdict (See App.

"A, p. 3). Ih so doing, the Court. of Appeals has not

only deprived petitioner. of the constitutional right to a

jury trial, but has seriously impaired the possibility of

antitrust enforcement through the medium of the: private

action. | ae

This. Court has held that a private onilainent plaintiff

should not be deprived of a jury trial by summary judg-. ~

‘ment where ‘‘. . . motive and intent play leading roles

. and hostile witnesses thicken the plot.’’ Poller v. .

Columbia Broadcasting System, 368 U.S. 464, 473, This

. Court should not now permit a Court of Appeals to de-

prive a private antitrust plaintiff of a jury trial, after a

verdict, where summary judgment would ‘have been, clearly

unwarranted.

: ‘i

1. Prolonged Below-Cost Selling of: a Particular Product in .a

Particular Geographic Area by Large, Diversified, National —

. Sellers Showing Overall Profits Is in and of Itself Sufficient.

* Evidence of Probable Substantial: Adverse Effects Upon

Competition.

The evidence showed that respondents all sold frozen

fruit pies in petitioner’s trading area not only at dis\

_ eriminatory prices but at money-losing “prices. Those

below-cost sales by» all respondents ° continued for several ©

‘years prior to the complaint in this action. Petitioner.

had .the only: pie plant in the area. _ |

_ The evidence also showed that ‘respondents all hind. the

great bulk of their business in other ayeas and in prod-

ucts other than frozen pies, ‘and, that in each case, their -

operations returned multi-million-dollar profits on an over-

all basis. 2 | : ase

‘The evidence further. showed the petitioner was en--

gaged in the pie business only, and that it did not. have. .

profits from the sale of other. products or from affes in

other geographic areas with which to wage "a price war >

in the area, where it sold frozen pies.

- This evidence alone supported the. jury ’s iieiieiiidie

(and well-nigh inescapable) | conclusion’: that respondents’ —

discriminatory pricing policies in petitioner’s trading area

were reasonably likely to substantially lessen competition

or to tend to create a monopoly,*

The decision of “the Court of Appeals to the eee a ,

conflicts with. this Court's decision in Moore v. Mead’s

Fine Bread Co., 348 U.S. 145, 119. There, this Court —

“We have here an interstate industry i increasing its

domain through outlawed. competitive practices. Pie;

_ [T]he beneficiary i is an interstate. business; the treas-

- ury used to finance the warfare is drawn from inter- |

state, as well as local, sources which include not only

respondent but also a group of interlocked companies

engaged in the same life of. business; and the prices

on the interstate sales both "by respondent and by the

_ other Mead companies, aré kept high while. the, local

-prices are lowered. If this method of. competition

were approved, the pattern for growth’ of ‘monopoly —

would be simple. . . . The competitive advantage

would then be with the interstate combines, not by

reason of their skills or efficiency but because of their

. Strength and ability to wage price wars.”’

‘Here, the effect of respondenig’ localized statis

can seen in its impact upon competitors other than

petitioner. . The Court of Appeals, i in support of its con-

clusion that the frozen pie business was highly competi-

tive, noted that there were over 200 manufacturers of

frozen pies in the United States, and that over 30 brands.

were sold in Washington, Oregon, Utah, Arizona and :

‘Colorado (App.-A, ‘pp. 6-8). .

However, as Pet’s Exhibit PA-27 prey sity

were able to identify only 19 brands advertised at retail

in Salt: Lake City in the calendar years 1957 through

1961. Of these brands, 9 were packed by either petitioner ,

or respondents (D. Ex. PA-27). Of the remaining 10 iden-

_ tified brands, only 4 wete advertised in both 1960 and

1961 (Id.). This almost ‘total exclusion of competition

from Salt Lake City is hard to explain on the basis of

geographical — Petitioner aad. the bd frozen pie ce

a | a. 8

plant in the intermountain. area, to be sure, but respond-

ents managed to blanket the United States with their

' frozen pies from a maximum of threé pie plants’ each. --

The obvious inference is that petitioner remained i in the

Salt Lake ‘Market only because it had to remain, and that ~

respondents ‘sold in that market at the low price level which

their price discriminations had created for ulterior and

monopolistic, motives.

_ urt. of ‘Appeals’ canelnsion. that acpeiiaai?

r al price-cutting could not reasonably be expected to

sve affect competition is; on these facts, a legal

holding which must necessarily have serious adverse

precedential effect on future entoreeinent of = antitrust |

2 ‘inline ik: tabs Petitioner Would Create a

Reasonable ’ Likelihood That. Their secretes Would

Adversely Affect Competition. -

In‘holding that there was no reasonable possibility that °

any respondent’s price discriminations would ‘substantially

. lessen competition or tend-to create a: monopoly, the Court

_ ree Appeals disregarded significant evidence of respond- —

ents’ intent. It thus has brought itself into conflict with

this Court’s recent decision in Brown Shoe Co. v. United

States, 370 U.S: 294, 329, considering the significance of

“‘ihtent’? in evaluating probable future competitive effect

.of a challenged trade practice. e Court.of Appeals’

opinion probably also conflicts, on this point, with Alles ~

- Corp. v. Senco Products, Inc., 329 F.2d 567, 572 -(6th Cir.

1964) and Lessig v. Tidewater Oil Co., 327 F.2d 459 (9th

Cir. 1964)..

5 ae RA NR cath TL INS eR ES ea tention Weisnicla ore art

Bae te

43. é I

8. ie Court ee nt teen

| The ine which Pet aa ‘the Genital Manager of -

its frrosed Foods. ‘Division through petitioner’ 8 plant dis-

: guised as a ‘frozen food broker from the Northwest” has

been described above. The Court. of Epen's passed the

incident off as **, . reprehensible and:;. . not to be eon-

doned’’ (App. A -p. 30). i ee ise

Decisions in’ other circuits hold that an jateeieii of

' predatory intent may be drawn from evidence of indys-™

trial espionage. See American Tobacco Co. v. United

_ - States, 147 F.2d 7 113 (6 Cir. 1944) (affirmed 328 U.S._

. »-. 78)3,United States v. General Electric Co., 82 F. ‘Supp. 753,"

* 901 (D. N. J..1949). | es \ :

‘The Tenth Citenit has clearly rejected this well-con-

| sidered, rule. Its decision on the — creates a conflict

in the Circuits.

4. Pet’s Contract With Safeway Was a Cloak Not Only-for a a

Two-Price’ System in a Single Market But Also for a

Geographic Price Discrimination. |

The Court of Appeals has treated ‘the discrimination °

inherent in the Pet-Safeway contract like the discrimina- .

tion charged in Borden Co. v. F.T.C., 339 F.2d 133 (5 Gir.

1964); cert. granted. —— U.S. ——,' docket No. 106. In

Borden, the question revolves around the market efféct

of a two-price system whereby Borden sold private brands

at substantially lower prices than its ‘‘Borden’’ brand

‘in the same geographic market area.. In treating the Pet-

Safeway contract in the same ‘manner, the Court of: a

Appeals ignored the important econiomic-factual distinction

Wins upon a — S claim is anes, Pty ee

. a

. , ; " ° °

. ‘ x

. . e ; . i

sc machen sae 2 Soe ee hn he i a ee a a at a I Le AG ot nen manips ee nee

"Since it was ‘stipulated that all of the products! in the

@ase (except Pet’s lightweight, 20 oz. ‘Swiss Miss”) were —

- of “like gradg, and quality,’’ petitioner showed discrimina-

- tion as between Pet’s° low price for. the: Safeway ‘*Bel

Air’’ private ‘label in the. areas in which petitioner did

business and-its high price for the ‘‘Pet-Ritz* —

brand ¢ in other areas.

- The economic-factual distinction between the two situa- ‘

‘ tions is basically this: Where a manufacturer is selling both —

a proprietary label and a low-priced private label side

ee side, he -is -in effect competing with © imself, and will:

—” hesita: to press this competition too vigorously. But

where the private label is sold in one market and the pro- —

_ priéfary label in another, the seller. need feel no sueh inhibi-

- tion. By maintaining a high price for. its proprietary brand

in one location, the seller ‘makes profits to subsidize preda- ~

toty low-price selling in another area under the private

label. ‘That, as petitioner’ 's evidence shows, 3 is. What ~~

spondent. ‘Pet did here.

.. This Court may decide to legalize sndh } pricing practices

‘ in Borden by finding that identical goods sold under dif-

. ferent labels are not of ‘like grade and quality’’ ‘and .

that their: prices may thus not be compared under: the

‘Robinson-Patman Act. But such a holding could not in

_-any way affect this case, int which it has been established

‘by stipulation that-Pet’s ‘‘Pet-Ritz”’ and “Bel Air’? pies

_ afe-of like grade and quality. Segal FURR: |

5: tai ours ot Aippanla Tgnate Tajeetsis Ajeet tha ‘Pot:

Ee Sn, Kae Sent ON

. Considered. |

The. Court, of Appeals held that. Pet’s sultantial sales 3

to Safeway for resale in petitionér’s trading area -were —

irrelevant to pétitioner’s claims under-Section 2(a). of the

—

. Robinson-Patman Act because petitioner would under no-° .

circumstances have been able. to obtain the Safeway busi- : ;

%: ‘nese ° for itself, and, therefore lost no sales (See “App. A,

'p. 61). This view ofthe ‘‘private brand” problem ignores

at least- two ‘significant competitive impacts which, Pet's

discriminatory Safeway contract probably had—a general

_ lowering of the price level throughout the: market, and.a —

‘general strengthening of er ‘8 very substantial mar-

ket position. ne ;

“There are, indeed, Circuit court opinions “which focus _

.. upon the diversion of customers from one seller to another a

.- as the injury most likely to result from price discrimina-.

"tion (See e.g. Samuel H. Moss, Inc. v: FTC, 148 F.2d 378

(2d Gir. 1945) and Anheuser-Busch, Ine. ». ‘FTC, 289 F.2d

835 ‘(7th Cir. 1961). But these cases surely do not hold

that the only possible i injury of which petjtioner’ here may .

_ properly complain is diversion of business to Pet. |

This Court should make it clear that the price-depress-

ing effects of a regional price discrimination: form the

basis of both 4 finding of potential i injury to. competition

. and of daniagés for a: private litigant. : 2

es Too Cour of Appbals Undertok to Rismine Pet's, “Cost

Justification’ De. Novo. mee,

The Court of. Appeals has held-us a- piadter of law, that -

: —— Pet ‘has, Proved “cost jaricgton’ 08 ied

46 ;

@:. regional price dhicaieninatiien: involving the Bel “Air label - Sa

~ (App. A, p. 61).. The Court of Appeals reached this

‘ conelusion i in spite of the rule that Pet was charged with

-the ‘burden of proof on the’ point (see United States wv.

_ Borden Co., 370 U.S. 460) and the j jury presumably found:

against get on the i issue. : '

"Proof of cost justification requires TES more thorough.

- and convincing evidence than Pet adduced, even if Pet’s |

_ evidence were required to be believed: ~ See Automatic - :

- Canteen Co. v. FTC, 346 U.S. 61; United States v. Borden

Co., 370 U.S. 460." :

There i is serious 3 question as to whether the “ost justi---—_—

fication’? defense could ever be resolved in .favor of a

_ defendant as a matter of law, since the evidence of cost .

: justification necessarily comes from the defendant, ai and the -

burden is on thé defendant to prove it. : :

oe "Tho Inferences Which the Gourt of Appeals Drews From Post, +

ae Complaint Evidence Would Eliminate Private Treble-

- Damage Actions Under the Beotion 2(8) of the Robinson-

ee ee eG ree Pee Se

In éosehadinge that ‘defendants’ pre-complaint conduct |

could not have- had the reasonably probable effect of sub-

stantially lessening future competition or tending to create

- @ monopoly, the Court of Appeals relied upon its analysis

.. of post-complaint market conditions in 1962 (App. A, pp. - 2

_ (59-60). The.Salt Lake City market shares of Carnation

and Continental did, apparently, temporarily decrease

after the complaint was filed in: September, 1961. From —

. this fact, the Court of Appeals’ ‘inferred that defendants’ =

lace conduct. could not have ial the potential Regt ie

ue) pS aon Semen PARE NCL eet Nah oe nal Oh Ne aie Nee ed

". the jury to draw the inference that respondents had re-

oR perpetrated i is to be judged by the ‘wrongdoer’ 8 conduct

intl compte effest proscribed by & Bection 20, of the. 6. fe

Robinson-Patman Act. nee

But defendants’ conduct after the fling of the com- |.

plaint in. this case was almost certainly conditioned by the *

"very existénce of the lawsuit. Petitioner’s counsel urged |

‘stricted. their discriminatory price-cutting in Tesponse, to

: the complaint (Tr. rash It is fairly infereble that er

did: °. Ze

‘The interpretation of poat-sonpleiat evidence » adopted

by the Court of ‘Appeals: would seem to present & com-

- plete. -defense-for_any—defendant “in—any—private action —

brought under either Section 2 or Section 3'of the Clayton

. Act. Each of those Sections is an ““ineipiency”’ statute,

requiring an analysis of what “may be’? the competitive |

effect of the discrimination (Section 2), or of the. exclusive

; dealing or tie-in provision ‘(Section 3). a

If what “may be’’ the effect of wrongful conduct when

after he is sued, the private remedy for past damages aes

will be eliminated whenever - -the wrongdoer ameliorates

his conduct before judgment. .This result conflicts with

the opinion of Wyzanski, J: in Union Leader Corp. v.

: Newspapers of New England, Inc., 180 F.Supp. 125 at p.

* 148, injunction stricken on other grounds, 284 F.2d 582.

(1st Cir. 1960). Cf: Anderson v. ‘Shipowners Association,

31 F.2d 539 Cente: ads :

a ——

Om A "a nt tain et ee Wa cae

vo ~ ing’ Out, as Legally Impermissible, 8 Held Allow.”

& "whe Const of Appeals’ Holdisig That Petitioner's 1958

Yee re “‘Approached If in Fact It Did Not Amount to a Monopoly’’

\ ee eee ee ie GAME,

. 1957). ; ;

Petitioner. submitted to en jury - damage studies based

in part upon pétitioner’s 1958 market share. The Court of a

Avpes sald: |

a8 contention that.Utah Pie ide entitled to sae

thie: ‘ciiraordinagy- market share of 66.5; attaine

. 1958; fas of its own’dead weight. To approve !

_@& contention would-be to. hold that Utah Pie. was ~

"entitled to maintain a position which approached, if it

* did not in fact amount to a monopoly, and could not.

exist in the face of prbper and healthy sme giet

(App: A, P. 69). > |

In fact, petitioner’ ~ 1958 nidfket share did exiet ‘in the

face of: ‘proper an and i healthy competition. 2 Tt was not until :

eros respondents émbe embarked upon-their course of discriminatory |

_—__.priee-cutting that. petitioner’s market ° ‘share been: ta!

pani ete decline, | : vei ee eee

Respondents’ own economics calsetk testified that he

‘‘would expect’’ petitioner to have most of the bysiness F

around its ‘plant (Tr. 1035). ° He also’ testified that he

' would ‘not find. it surprising if petitioner had no sales

whatever in the vicinity of respondents’ plants, all of —

which were located hundreds of miles away? : :

”

es ‘Respondent Pet’s ‘nearest Neits were in ‘Prenio, Californis,

and Frankfort, Michigan. Respondent Continental’s nearest

plants’ were in Webster City, Towa; and Watsonville, California.

Respondent Carnation’ a _—. was in Los ‘Angeles, a “3

- ‘The Tenth Circuit’s assessment of ‘‘near:monopoly” —

_ + based upon the’ local market: share of the only local pro-

oe. ducer is in. "flat conflict with - the decision of’ the’ Fourth

_ - Cireuit in Maryland -Baking Co. v. FTC, 243 F.2d AP6 ¥

(1957). There, the record showed that Maryland Baking _

« had charged discriminatory prices in the marketing area of

_- @ small competitor: with the. result that the small competi-.,

‘ tor’s market share‘had fallen from 91.3% -to 58.2% (See -.

FTC Docket No.. 6327, 52 FTC 1679, 1682 iil ‘The

Fourth Circuit. said: ett

, ee for the purpose of driving. the” competitor out. of

oo _: business and that it. deprived the-competitor of .

..\ ° about half ef its business in the product in question.

- The contention that petitioner’s actions did not affect

competition . . . is so lacking i in merit as not to war-

rant discussion” (243 F.2d aot D: CRA eagle

The Fourth Circuit held that a Sects Sociie 91.3% to

58. 2% market share hurt competition. | The. Tenth Cireuit

held that @ drop from 66.5% to 45% could not. The con- |

- flict should be ‘resolved. cae - *

°%

aera © ae did wks gk bs Messiaen

| Witneeses, Apparently on the Theory That Is Was ‘‘Unoontre,

dicted’’, in Conflict With the Second Cirenit Rale. Bee

| “In discussing Pet’s industrial espionagé report on “peti

tioner, ie. Court of Pee reviewed the evidence as

follows: “‘:-. . the .information contained in Dittman’s |

” report ‘was never. conveyed to, Safeway personnel. Ditt-

‘ ° Man so testified and so. did Young, Safeway’s buyer. It.

thus appears, that the Dittman. report was. as never used in

‘ < ee, ae | on tenth fi a

WOE tes ee

aie ie + compeltiive forts with Utah. Pie.’’ Ore i p. 30;

"emphasis added). pit eet eg

- Dittman was a”-Pet- officer and an interested witness.

| This. Court has 1 held. that an interested witness may be

eee “ disbelieved. Sonnenthei v. Christian Moerlein Brewing

2 Go, 192 U8. 401. |

‘But Young was an employe of a third telly, din cus-

tomer of -both Petitioner and respondent Pet. His credi- J

bility was a major i issue in the case; ee attorney —— fe

‘ his summation as-follows: r 7

; “In my. 30 years. of law practice, I er never had:

one of my witnesses accused. of: being a liar. Three -

of my witnesses were accused by the opposition of

being’ a liar—the — a for the b ected Syerer

2 +. (Tr. 1198).

ooo Unless the Tenth Circuit had rejected ‘the itetad Cir- ber

- + ent rule, it could not have relied upon Young’s testimony. —

The Second Circuit rule is that even an uncontradicted

witness may be disbelieved. See Dyer v.- MacDougall, eee

| FB. 2d 265 (2d Cire. 1952). Since the Tenth Circuit pur... 9

ported to give petitioner the benefit of all the doubts on °

the evidence, it has héld, in effect, that it was compelled .

’ to believe @ witness even though. petitioner urged the jury

to. comelude. that the witness was lying. “8

ge edibalies Wintec itn fore .

ee ? iraid wore pe abot a ape ‘for... -

5 Petitioner introduces a great deal of sidonioe on Cénti-- >

; nental’ Denver discriminations (Tr. 488-499 ; “PL-Exs. T7-

39, *

The Denver aba rename -were argued to ‘the

°4

4 Z

‘

‘ - ° «7g ~.

>> AS agg . _ : o- Boe, -

“e. ; . o?

jury (Tr: 1183, 1165). "The jury forind that each respond-_

ent, including Continental, had “‘. .. individually and. inde-

pendently discriminated in the prices in the Utah trading

area...” (Tr. 1283, 1284; emphasis added). The Court

of Asante construed the instructions as not permitting 3

the jury ‘to find that the “Utah trading area’? included .

Denver (App. A, p. 65). It then ordered. the case re-

-manded and judgment emnorad: for Continental (App. B;

" p. 89).

The Court. of Appeals’ disposition. of this i issue without x

ordering a, new trial would seem to conflict with the deci-.

‘sion of this Court in Weade v. Dichman, weet: é on

1d US. ‘801. a = ape

40s

10. The ‘Action of the Court Below in Reversing the Jury Ver-

| dict and Judgment in Favor. of Petitioners Violates the Bale

"That Resolution of Questions of Fact Are for the Trier of

| Fact and Not an, Appellate Oourt... =

Respondents were. entitied toa reversal of the judgment. s

entered upon the jury ‘Verdict: in the Trial Court only if

not supported by substantial evidence, giving to’ petition- |

ers. the benefit of all conflicts in the evidence and all the

“presumptions and -inferences that could reasonably. be

drawn from the evidence, considered ‘in. the light most, .

: _* favorable to- -petitioners. femine v. Cooley, 281: U. S. 90

* ~ (1980); ” | ; Z

The ‘action of the Trial Court i in reversing a jury. ver- ay

dict, in effect, deprived petitioners of a trial by jury |

contrary to the Seventh Amendment of the Constitution.

Appellate Courts. are not © search. ‘the. record to take

cases _ from the su Tennant v. Peoria & P. U. By.

Es | 52° ; i j

Co., 321 U.S. 29 (1943); Ellis'v. Union Pacific Ry. Co,”

329 U.S. 649. (1947); Lavender v. Kurn, 327 U.S. 645 :

_ (1946); Story Parchment. Co. v., Paterson Parchment .

Paper Co., 282 U.S. 555: (1931). 3

‘As stated in Tenant v. Peoria & P. U. Ry. Co., 321

US. of (1943) by Mr. Justice Murphy: a

. The focal point of judicial review is the

annua of the particular inference or conclu-

- sion drawn by the jury; it‘is for the jury, not the

' Court, which is the fact-finding body.. It weighs the —

, contradictory evidence and inferences, judges the

“eredibility of witnesses, receives expert instructions, ~

and draws the ultimate conclusion. as to the facts. .

The very essence of its function is to select from.

among conflicting - inferences and beans that —

which it, considers most reasonable sta |

The right of the jury to select. from conflicting infer-

ences and conclusions that which it considers most redson-

_ able is a right which cannot. be ignored, whether it relates

to causation, impact, damages or any other issue which i is

in conflict. Tennant v. Peoria & P. U. Ry. Co., ‘supra at

321 U.S: 35; Sentilles v. Inter-Caribbean Shiging Corp. @

361 US. 107. (1959).

In Stone v. New | Chicago & Bt. Louis R. Co., cod

US: ‘407 (1953) this Court stated::

“The, fact that fair-minded men. might likewise

reach different conclusions on this branch of the case

emphasizes the apptopriateness of also leaving it to

the jury.”

<= -Se e pees

: CONCLUSION eis

~ For the foregoing reasons the Petition for a Writ of

Certiorari ought to be granted. : 5

Dated, meget 23, 1965. x = |

By. OSEPH e Aus070, |

Attorney for’ ‘Petitioner. -

icone P. Mrronet,

G. Josepn Berrarm,-Jz.,

_. Roserr W. Hueuzs,. ~ va , ag 2 ge

. (Appendices A, B and © Follow)

o ; =

bee

7 ‘ A ; oa : ‘ G .

“United States Court oe Appeals , |

Ten Cireuit °

- May Term - 1965

| Continental’ Baking Company, r Deane

corporation, . . Appellant,| — a

GT, , "| No. 7306

Utah Pie Conipany, a Utah’ sisal: :

Prt Appellee.

Carnation Comply, a Delaware corpo-

ration, : | —— |

SRR Fe en + No.:7308

Utah Pie Company, a Utah sccpncdiaial ns Geers ;

“WE Mose Appellee. P

Pet Milk en a Delaware ‘corpo-

ration, ae. - Appellazit,

Utah Pie Company, a Utah corporation :

Purkis Appa : et

No. 7309 -

- Appeels from the United States Districg Court .

for the District of Utah phe

: Opri10N Lo ; )

’ Before MURRAH, PHILEIPS cand LEWIS, Cirenit :

eeoy Judges. © as

- PHILLIPS, Circuit Judge.

Utah Pie Company? brought this action against Conti.

mene. Baking Company;* Carnation Coligeay,* and Pet.

‘Hereinafter ‘called Utah: Pie.

2Hereinafter called Continental.

‘Hereinafter dalled Carnation.

4 _ ~ - ° . ” . 3

. *. °

“Milk Company: under Title 15 USC. (1958 Ea) 615

and 26.

The canpleint charged that Continental, ‘Carnation and |

Pet entered into a combination. and conspiracy te restrain i 3

~ Interstate commerce and ‘monopolize Such commerce’ in

: _ violation of Sl and 2 of the Sherman Act (15 U.S:C.A..:

~s- §SL and 2), to. be effected by destroying the competition

a of Utah Pie through the weakening of its capital structure

gk aid the destruction of its profits, and to violate §2(a) of

5 in Clayton .Act, as amended by the Robinson-Patman |

. "Act (15 U.S.C.A.-§13(a)), by price discriminations in the

%: State. of - -Utah, effected by selling their frozen pies at:

prices ‘below cost”” in the State of Utah and at lower ©

a in such state than they charged for “their frozen frozen

"pies ‘‘in other western states. 196 : y

‘The case came on for trial in , February, 1963. At ‘in 3

- close of the exjdence, ‘each defendant properly moved for

; a directed yerdict-in its favor on the §2(a) claims —.-

by Utah; Pie. ‘Each motion " was denied.

3 |

" fendant on Utah Pie’s:42(a) claims. Each defendant, in

accordance with Rule 50(b) of the Federal Rules of Civil

Procedure, made a timely and proper motion to. set aside

the verdict against it and enter judgment n.o.v in its

favor on Utah Pie’s ‘§2(a)- claims. Each | motion was :

The jury ‘ne returned a verdict i in favor of Conti:

nental oh: a counterclaim asserted by. it, charging % a: §2(a)

violation by Utah Pie. ‘On Utah Pie’s n.0.v. motion, the

court set aside that verdict and entered judgment on the .

_ counterclaim‘ in favor of Utah Pie, notwithstanding it had

not nioved for a directed verdict in its favor on the c

counterclaim.

On February 23, 1963, a judgment was entered tor

‘Utah Pie against each defendant for treble the-amount. .

of the verdict against it, and. permanently enjoining each ~

| of the defendants from. violating §2(a). Appeals from

each of such judgments have been taken. The injunction

portion of the judgment was. stayed by this court, by. ;

order entered ‘March 21, 1963.

The §2(a) claims and the conspiracy alien were tried |

at the same time and the evidence in support of them

was. commingled. Certain facts, if set out and considered

in isolation, would present a distorted picture of these |

_ cases. To get a true perspective of them,. the whole

factual.picture and the relation.of each of the facts to

each other must’ be brought into proper focus and con-

sidered together. |

In each. ‘appeal, nial Cintinentel’s appeal from the

— favor of Utah Pie on Continental’s counter-

Ao support the, verdict in favor

of Utah Pie, or r warrant the injunction. Since we conclude

the judgments in favor of Utah Pie must be reversed. on

that. ground, we shall not consider the other. grounds

- urged for reversal.

Many of . the facts - sibiting -to the 5 §2(8) dulos are

pertinent in all of the appeals, and we will undertake to

set out a portion of such facts in a general statement of

- facts. We will then set out separately the facts particu —s_—iy.

larly applicable in each of the respective appeals.

* * :

General Statément of Facts

7 ‘The evidence in these cases covers the period 1958 to

" 1961, both inclusive. It is free from substantial dispute,

ican for a few statements of opinions or conclusions

not based on any substantial underlying proof. |

. The offering prices, selling prices, sales volumes, ” per- eae

centages of market shares, earnings, and other like mat-

ters; the tables and charis which appear in this opinion ;

_ and the appendices annexed hereto are all based on un-

- controverted documentary evidence, some of which

introduced by the plaintiff and. some “by the defendants.

~The phrase “frozen fruit pies” is sometimes used in

the frozen pie industry in a broad ‘sense and as including

_ frozen apple, cherry, boysenberry, peach, pumpkin and

mince pies, — the — two are = strictly =

Sy ae

‘ late cream, cocoanut ‘cream, and the like.

‘embraced in the phrase ‘‘frozen fruit pies” in its broad

_sense.* We will hereafter refer to. them gan atd as Hosen |

_ basis, of 40,000 frozen pies a day, or about one and one-

ing, fruit pies. In its broad sense, the phrase’ does not

embrace frozen cream pies, such as lemon cream, choco: Cie

The frozen pies involved: in these appeals are those

pies. 9

| The phrase ‘Fronen fruit pies” is also used in @ aned I in a mo

‘narrow sense, as, embracing-only the strictly frui fruit pies,

and not including mince, pumpkin, or the cream pies. .

Frozen ‘fruit. pies in-that narrow sense will be referred

to hereinafter as” “frozen fruit pies.”

Utah Pie, a Utah corporation, owned and operated by

the Rigby family, was in the fresh pie business for nearly

30 ‘years prioryto- 1957.. It marketed its fresh pies in Salt

Lake City and other points in Utah, in Las Vegas, Nevada,

Grand J unction, Colorado, Farmington, ‘New Mexico,

Evanston,” Wyoming, and at one other city in Nevada.

Faced with a declining volume and. a substantial loss:

in its fiseal year ended October 31, 1957, Utah Pie, in.

e= Jatter part of that year, entered into the frozen pie

It had much of the facilities coat for. the frozen pie )

business in its old plant. It opened a new plant in 1958, -

which had. a capacity, at least by 1961, on a three-shift .

half million cases of frozen a per year. There are six

6It was aipulaied that the a? frozen fruit pies involved in’

these cases were frozen apple, cherry, peach; boysenberry, mince

and pumpkin. %

pies in a case. It had adequate. refrigeration for fruit,

produetion facilities, and ‘storage of frozen pies. . a

frozen pie ‘business was well managed and its ’ sales and

_transportation costs. were low. It’ had the only frozen.

| pie plant located: in. the Salt Lake City market, , which

enabled it to deliver. to its customers frozen pies in small -

quantities. 7 ce

The frozen pie business is vida satice ZA and high

competitive.

The six western states of California, Washington, ies ies

gon, ‘Utah, . Arizona and Colorado embrace a. portion of

the Inter-Rocky Mountain and West Coast regions. In

éach of. such states there are one ‘or “more separate and

distinct frozen pie market areas, which comprise a large

metropolitan center and the territory closely adjacent

_ thereto. There, are distinct frozen pie market areas in

Los Angeles, San Francisco, Seattle, Portland, Spokane, :

| ‘Salt Lake City, Phoenix and Denver. The periphery of

each of such market areas is nearly the same as that of

the area in which its metropolitan newspapers circulate,

that, because retail advertising is the lifeblood of the:

frozen pie industry and crucial to volume sales. The.

- current retail . price in a particular market area at a-

particular time is generally fixed by the prices at which ‘

the chain stores and cooperative grocery organizations

advertise their frozen pies _ in ‘the Thursday and Friday .

editions of the local newspapers, ne and circulated

in that -market area.

) During : the period 1958 to 1961, inclusive, retailers of ,

frozen pies in the Salt Lake City market advertised Utah |

Pie’s brands a aad many more times than sie did

Pc ae ge of the other manvfasturers ooling in

ee ‘that market."

The manufacturers and distributors of salted brands,

who sell. throughout the United States,, the manufacturers ‘

_and distributors of regional brands, who sell in several

of such local market areas, and sometimes 4 local manu-

facturer and distributor, whose single plant i is located in

a particular market area where his principal business is

done, but who also may sell in other market areas in the ™

same region, usually make up ‘the group competing in a

_ Tocal market area. More than 30 different brands are sold”

- in the-six western states referred to above, and the num-

The following is a tabulation of frome ie isements,

which appeared in the Salt Lake City, newspapers from 1958

through 1961. -

‘ Brand Bs -1958° ‘° 1959 1960 ai

Mayfresh 6.50. 08 eee ae

Moran Uran Pm 27 19.9 30 309 59 447 76. 45.0

Pet Ritz %. 191 13°1834 2 15 .0 0

Swiss Miss 0 0° 0 0 6-45 10 -59

Tora. ‘Per % 191 13 184 8 60 10 59

(Simple Simon) 19 140 8 83 4 106 4 24

Continental. ) | othe

_ (Morton). - ¢. 0:8 O12 6 8

Bler. . 0 O 7 72 14 106 12 71 |

“Others. 64 470 36- 87.1 36 273 62. 36.7.

ToraL 136 100.0 97 100-0 132 100.0 169 100.0

| appeals were as follows: me

od 2 8 ;

-, ber: of nation-wide . manufacturers of frozen pies is

over 200. ) : aly os

The “brands, or ‘table, used by the parties to wee

Utah Pie “Utah,” “Frost Nn? Flame,” }

° . **Mayfresh,’’: and “Sonny Boy’’: |

Carnation “Simple Simon’’;

Continental ‘Morton 8”’5

| Pet ne Ritz”’ arid “Swiss Miss. i

Utah Pie. and Pet also manufustuied frosen pies for

eee

Safeway Stores, Inc.,! ‘under the latter’ Ss: label, ‘‘Bel-air.”? °

The price in 8 particular market area depends on the

number and ‘identity of the competing manufacturers, the

competitive factors in such market, and the extent of the

thrust or pressure of such factors at a particular time.

A local’ manufacturer and seller, with his plant located .

in a particular market area, because of his low distribu-

tion and selling costs, preferences nornially given to a a

local business, and his ability to sell ‘and distribute frozen~ —

pies in either Jarge or small quantities; is. in a position to

~ assert 2 very substantial competitive thrust and pres-

‘sure, not présent where there is no local manufacturer

. and eller competing. in the area.. Another. — :

factor, which affects some local market area prices is) the

. presence of private or controlled brands of frozen pies,

which are usually sold by large retail chains and mem-

bers of cooperative grocery organizations, ant are ai

“tera Bl, fc, wih a hndgnres i Onkad, Ou

fornia, owns and operates 1,852 food stores in 27 states and the

pms District of Columbia, extending from the Bast Coast to the West

s 3 es ; . .

\ fee ie

a ° - °

; ‘died by them in. n large quantities at preferential prices.

oh controlled label is owned by the manufacturer, but sold"

. . to only. one buyer in a particular market. A private

- by one or more suppliers. _ ee

brand -is “owned by. the buyer, and may be manufactured

‘se

Because the competitive thrusts’ and ' pressures in a \.

particular market area differ substantially from those at -)

i given time in other market areas and change froni time

to timé in the several market: areas, the- _ prices in each

market area change from time to time independently of |

‘price changes in other market’ areas. Hence, the prices in.

the several market areas in such Intermountain and. West.

}

Coast . regions have little, if any, relation to each cities /

and are not uniform. They vary from time to time aa |

from market ‘area to market * ared.

"The Salt Lake City market area® ‘comprises most of .

the State of Utah, southern Idgho, and small areas ad-—

jacent: to Utah in the States of Wyoming, Colorado and

, | Nevada. That market developed its own competitive pat-

tern. No brand. seemed to enjoy a consumer ’s loyalty, '

~ with the possible exception of Utah Pie’s Utah brand.

Pies were purchased primarily on 8 price basis. The pre-

vailing’ retail price was fixed by the advertised week end

specials appearing in the local newspaper advertisements

of the grocers.on Thursday and Friday. |

In the first pert of 1958, Utah Pie marketed its frozen

pies in. Utah and Idaho. It gradually extended its sales

to other areas, so that by 1961 it was gelling frozen pies

in Utah, Idaho, Washington, Colorado and” Wyoming. ’

However, its sales outside of Utah and southern Idaho

oHereinafter referred to as the “Salt. Lake City market.”

. . 4,

- during the period involved in this law suit, 1958.to 1961,

. ‘were negligible. See Appendix I. attached hereto. {| - -

‘Utah Pie entered ‘the fiek _state y

1957, at least. two years after Caruation, Continental and

other manufacturers had introduced f1 j in

the Salt Lake City market. ‘Throughout the period here |

. involyed, Utah Pie's competitive emphasis yas on price

and except - for a: comparatively few | instatices, herein-

. after noted, it sold its frozext pies at prices below ‘those |

of ite- competitors.

In 1958, Utah Pie sold 75,989 cases of frozen pies; in’

1959, 76,744 cases; in 1960, 167,788 cases; and in 1961,

eS ce creased 270.5 per cent and its dollar volume in sales of

>» frozen pies increased from. $139,306.24 in the fiscal year

. ended October -31, 1958, ‘to $407,841.25 in the fiscal year

enided October 31, 1961, an increase of 292.8 per cefit.

Salaries paid the Rigby family engaged in ‘the business .

ae inereased by approximately $30,000. during those four

‘ years and net income before taxes, as adjusted, went from

ee a. loss of $1,264.51 in fiscal 1958 to a profit in fiscal 1961,

- *°* before taxes, of $30,597.10. After taxes, it was $19,643.04,

| which was 28.5 per cent of = net worth. ~ '

> In 1958, Utah Pie captured 66.5 per cent of the market.

In 1959, while. its , volume increased, its share of ‘the

rapidly expanding market decreased to 34.3 per cent. In

1960, its sales volume more’ than doubled and its market

share. went pp to 45.5 per cent. In 1961, its sales -vol

| ‘market share held at 45.3 per cent.

1There are six pies ina case. _ igh

* 205,380 cases. During those’ four years its volume in

_ very substantially increased, as shown above, and ts F

During the entire period involved in these ¢ases, Utah

‘ Pie’s sales’ volume “and. dollar sales substantially in-

~ ereased as did its profits. except in 1958, and it enjoyed

a very large percentage of the total sales volume in the

' Salt Lake City market, which percentage stabilized at

7 about. 45 per cent the last’ two years of the ‘period.

e Throughout such | period it was continuously a/financially

strong business concern and a healthy and effective com-

_ petitor in the Salt Lake City market.

‘ Utah Pie’s phenomenal increase in sales of frosén fruit

pies, an increase of 270.5 per cent in four years, came.

notwithstanding’ its sales efforts were almost minimal.

_ Utah had but one salesman in the’nine states in which

Sit attempted: to sell frozen fruit pies during the years

1958 to 1961. This salesman made only isolated trips to,

cities outside Utah. Pie’s immediate trading area, the

Salt Lake City market. The company maintained no- per-

- manent sales force in such cities as Spokane, Seattle and ps

“ Denver. It once liad a broker. in Portland, but appar-

ently for only a shoft time. It- made an effort to secure

* "the account of Miller’s Supermarket in Denver, but the

Utah ‘Pie salesman was told he would have to contact the

chain’s ‘office in Chicago. No, contact was, ever’ made. The

amounts spent on advertising. during the years 1957 to,

1961, inclusive, were ere — pore were: a8

i follows: 2

_ Th fiscal 1957 R a 432.21 |

\ a Sh ..

ee RATE:

ae - 1959 _ 8,180.29 | :

See 19607 6 > 7/160.68

, 1961 1,226.01 ° .

As will appear from the table which follows, the de-

mand for frozen pies in the Salt Lake City niarket._

7 rapidly increased during the any 1958 to 1961, inclu-

eore sive, ce

: Se ‘following table fe a etepceiti sinies. of the total

sales. volume and the percentage of market shares of each~ *

_ party hereto and the other competitors in the Salt Lake ae ee

‘> City market in the’ years 1958 to 1961, inclusive,

: "1958 (Volume in dozens) nia Stak mn (ohne x abe ted

2) ‘Company “Volume % of Market

oO ae Carnatign es ae 5,863 103 ,

7 i Morton =. 754 a

. Utah Pie . 37,969.5 66.5

as “Others” "R187 sf ll

-° étals ” . 57,060: 100.0

1969. he Vink goby Sepeumy Te

; Carnation >. - 9,625 ‘86 7

- - Morton : oo182 rte Be ae eT

; | +e teers

Fin a Pet’ (em 15,962. )90' 699 yi a 355 ¢ 1g Bs

“ Others : 20911 =: 187 es "Le

fs Totals “Dim aon ,

oe Carnation - - _— 12.1 ,

Utah i r+ Suaissttiss. 44.425

Hy ads 64M seis 97.9. <tr k air 40%

SaaT8S RD mates 12.3

= Motels me: eo

te —— ‘ - 20,067 8.8

oe ae 8

dmee pny 2 OD , Sons zy 212

‘ > Pet mre cA )-66,786 29.45 iter bob, 1:7

on = i aaD ! )-ss 565.5 a) war 45

ipsa ist tend pen a

Totals 226,908 - 100.0

° : .

| i :

ant % ca

~» “ °

‘Many. frozen pie snsiiabbintiine gave rebates from

their list of offering prices in the form of advertising

‘nnmnnnne llowances for. stated periods, upon proof of advertising —

by the purchaser on tear sheets furnished to the pur-:

chastr for that purpose. There was no requirement ‘as to

size of advertisement, and the advertisement. needed only -

to be run one time to qualify the purchaser for an allow-

ance. The dollar amount of the allowance was not deter-

mined by the quantity of frozen pies purchased, nor by —

the size or frequency of the advertisement, and the small -

purchaser who advertised received the sanie allowance per .

case as the large. purchaser. In effect, the advertising al-

lowance is a discount and: fixes the net per case price at

the-pies purchased. -

We now turn to separate statements of the facts par-.

ticularly applicable in each appeal. However, from ‘time

to time, in each’ of such. statements, facts will appear

fe which obviously have general application in. the other two

appeals, but’ which we think can be better stated in the

context of the statement wherein they appear.

wv aa

: No. 7309 :

Factual Statement in the Pet“ Appeal :

on ‘is; a corporation engaged in: the ‘manufacture and

sale of food products, including frozen pies. Its main of-

fice i is in St. Louis, Missouri. Its frozen pie manufactur-

: ‘ing plants are located i in Frankfort, Michigan, Chambers- °

. burg, ‘Penneyivani, and Fresno, California.

Sa Nat

Pet sells and distributes its: pies from its three plants

throughout the United States. From 1958 to 1962, intlu-

sive, it was a competitor of Utah Pie in. the. Salt Lake

- City market. Pet entered the frozen pie business in 1955,

by the acquisition of a frozen pie plant at Beulah, Michi. ie

gan. Initially, its pies were, made in four flavors and

distributed in a relatively small north central territory, -

the Detroit-Chicago-Milwaukee area. In order to expand =~

its frozen -pie business nationwide, Pet. moved its plant

‘from Beulah to Frankfort, and then in 1956 acquired its”

: plant at Fresno, and in 1957- its plant at Chambersburg.

It marketed its pies under ‘they brand, Pet-Ritz. It added

new flavors and undertook. to accelerate consumer - -accep-

tance and demand through an extensive advertising cam-

paign, which » “emphasized "the quality of its pies. ’ This

_ advertising included advertising in local newspapers, dis- .

tribution of coupons that might be used jn purchasing,

pies, and demonstrations in grocery storgs to show how

easily the pies could be prepared for co; ption. It also —

included a large. expenditure for adve sing ona half-.

_ hour television program,, starring | Red Skelton.

_ Soon after Pet entered’ the frozen pie industry, the —

satire of. the market. began to change. As frozen pies -

became more and more in demand, nurherous regional or -

local companies, such as Utah Pie, entered the business.

- Because of the freight advantage, -which they had over

the national companies, whose products usually had to be’

"shipped into a region from a. distance, the local and re-

gional - companies were able to sell at lower prices than —

the national companies had been charging. Emphasis in

"many regional markets shifted from quality to price, and

“15

price becamie the principal factor of competition. ‘With -.

the. incredse of price competition, prices of frozen pies -

1957 and 1958, while prices. were ‘dealin and.

‘the market was expanding, Pet’s sales of frozen pies did ~

‘i not keep pace with the expanding market. In the Salt

_Lake City market, total sales in’ 1959. were 1.96 times |

total sales in 1958, while sales of Pet-Ritz pies were 1. 52

times sales ‘in 1958; total sales in 1960 were 1.64 times

-~ total sales: in 1959, while Pet-Ritz sales were 0. 58 times

sales in 1959; and total sales in 1961 were 1.24 times

total sales in 1960, while Pet Ritz sales were 0.46 times |

gales in 1960. :

During the period 1958 to 1961, inclusive, is total

sales of Pet-Ritz pies were the following percen

all brands of frozen fruit pies sold ‘i in the. Salt

> market: ,1958—16.4 per cent; 1959—12.7 per: cent: 1960-—

to the fact that other brands were being sold below the -

Pet-Ritz price in that market.

ees: When: Pet realized that advertising efforts were not

enough to check its continuing decrease in-sales, it made

William N. Harsha, who had been the. managing director

of Pet’s Canadian corporation, general manager of the 2

Pet-Ritz Frozen Foods Division. It assigned him to dif

ferent divisions. of Pet: to study its operations and finan-

cial and production problems. After a review and study

of Pet’s operations, Harsha decided to curtail the adver- .

_ tising and effect economies by eliminating duplication in

. overhead, increasing processing efficiency, . improving

| . production methods, reducing warehousing costs, and re-- .

: . ° . ‘ q > e

: 3 " - ° - ’

- : ;

Pee. eens ares :

a+ -— = - - - ~- _ - _— — ds—e — Os =. a

ducing freight costs by better scheduling of deliveries.

. Pet also decided to make an analysis of the frozen pie

_-market to determine what kind of pie the housewife pre-

ferred. It was then known that the housewife was price

conscious, but Pet, having spent large sums in advertis-

ing the Pet-Ritz brand as a quality product, did not want

to reduce the quality of that pie to enable it to compete

~ with lower-priced pies. As part of the effort to analyze

the market, a research director was employed, who began.

his studies in June, 1959. Soon thereafter, the Market -

- Reseatch Corporation of America was engaged to make

a study. to help Pet decide whether or not to add a

smaller and lighter economy brand of frozen pies. The

result of these studies indicated that. there was a market

. fora frozen economy pie and Pet introduced its Swiss

Miss pie in Denver in April, 1960, and elsewhere in ‘the

United States, including Utah, in August, 1960. Swiss’

Miss is an eight-inch, 20-ounce pie. Utah Pie’s brands.

are all eight-inch, 24-ounce pies. While it-did not fully -

meet the price competition, it enabled Pet to compete

more ° effectively, improved the profit picture of the

frozen foods operation, and restored some of Pets. dis-

tribution with major chains. "elds. ;

In addition to adding the lighter-weight, lower-priced.

Swiss Miss to its line of fruit pies -to improve its com-

petitive position, Pet.also entered into negotiations with

Ped Safeway Stores, ‘Ine., for the production. for it of frozen

fruit pies under the Bel-air label. It sold Safeway

25,462.5 dozen Bel-air frozen fruit pies in 1959, and in

“December Of that year. -pegured a. contract to supply Safe- : :

way with Bel-air frogen fruit pies during 1960. Under

this ‘contract, Safeway agreed iii not less*than

500,000 dozen and not more then 1,000,000 dozen frozen °.

_” fruit pies in 1960, and Pet agreed to manufacture and

deliver such pies to ‘Safeway.’ 11 The minimum quantity

was stipulated, because Pet. had to buy new equipment to

handle the added production, and assutance of a minimum

purchase , was needed to sere for the ‘cost of the |

Exhibits introduced * Utah Pie. reflect cost, gprenres tH ;

made of Bel-air frozen pies sold by Pet to Safeway. They

show Pet’s costs of manufacture, sale.and delivery of tert

such pies were $0.4980. less than. such costs of like pies . Poh

sold under its regular labels, and that the difference in’ -

price to Safeway of such Bel-air pies. and the price such ry. cost

» like pies sold to other customers was only $0.4275.° The- ee ost

difference in cost justified the difference in price under

the cost justification proviso. in §2(a) of the,Clayton Act

(15 US.C. §13(0)). | te 4

Safeway regularly followed the practice of requiring

the sellers of ‘its frozen pies to justify any reduction in

price to it by a showing Of cost difference. It did so- with

respect to'the sales of Bel-air pies to it by Pet, under the

_ ° December, 1959 contract, by an express provision therein

“" go requiring. : se

z Simultaneously with such efforts to sak ‘costs and im-

prove volume of sales, Pet, in 1958, began to reduce its

savertielge, expen for frozen pies. From $866,116

_ ™Under such pery Pet \ was to furnish Safeway’ 8 require-

ments of Bel-air frozen’ fruit pies for all of its food stores and

shipments were to be made from the Pet plant nearest the point .

of delivery.

in 1959, its: siipertising expenditures were reduced to

| $337, 510 i in fiscal 1961, and to $42,562 in fiscal 1962.12

By the time the present case came on ‘for trial, Pet’s

frozen food division, the. chief operation of which was the

production of frozen fruit pies, was making a net profit.

‘The Pet-Ritz ‘pies were ‘always sold in the Salt Lake

. City market at prices substantially higher than the prices:

at which the pies of Utah Pie, all of which were of the

_ ‘game weight and quality as Pet-Ritz, were sold.

In August, 1960, when the first Swiss Miss apple pie —

was sold in the Salt Lake City market, the price thereof

* was $3.29 per dozen. “At the same time, the larger and

heavier Frost ‘N’ Flame apple pie of Utah Pie was sold

at a price’ of $3.00 per dozen. Thereafter, during the

period covered by this action, the Swiss Miss apple pie

ranged ini price from $3.24 to $3.38 per dozen, while the

- Frost ‘N’ Flame apple pie ranged in price from $2.75 to —

$3.10 per dozen.

Except during the periods or months Mereinsfter noted

in this paragraph, the. prices at which the Swiss: Miss

frozen pies: were sold were always higher than the prices

at which the larger and heavier Frost ‘N’ Flame pies

were sold in the Salt Lake City market; and even in such

periods or months the prices of Swiss Miss were higher

_than the prices of Frost ‘N’ Flame onan ounce-for-ounce

basis; and professional buyers for resale always take into

3 consideration differences i in size and ‘weight. In the’ ee i

~¢ 8

12Q0n April 1, 1960, Pet Oot & its fiscal year for accounting :

) from the calendar year to a year ending March 1.

Consequently, eee: is no fiscal 1960. in. its scoounting.

) September, 1960 through November, 1961, the price of the

| Swiss Miss cherry: pie, if difference in weight be disre- ~

. garded, was lower than the price of Frost ‘N’ Flame =A

| cherry pie. That was true of Swiss Miss peach pie in .

August and October, 1960,.and January, February, March,

June and September, 1961, and of Swiss Miss boysen-

berry. pie from August, 1960, through December, 1961.

It was never true of Swiss Miss apple pie. | 3

_-~ * @ayfen Rigby testified for Utah Pie,.as follows:

stipes * with all of our advantages that we had,

* * * we knew that we could not enter the market )

unless. we could come up with a price ‘that would.

interest. the wholesalers in putting in our product.

We knew we’d have to be a few pennies under our

competition because of our locale. ’”? (Emphasis sup-

plied.)

<a Tt a

In January, 1958, the first date ‘that comparative prices

~ are:shown in the record, Utah Pie’s prices, instead of

- being a few pennies, were from 68 cents to $1.24 per

dozen lower than the price of Pet-Ritz pies, the only pies .

’ Pet was then selling in, the Salt Lake City market. In

that month, in ‘that market, Utah brand frozen apple pies

were sold at a price of $4.15 per dozen ; while Pet-Ritz ‘

frozen apple pies were sold at prices ranging from alow ~-

of $4.84 per dozen, to a high of $5.00 per dozen. During

+ 1958, the Pet-Ritz frozen apple pies’ were sold at whole-— ~.

salé in that market at prices that were approximately —

$1.00 per dozen higher than the prices at which Utah

-|- "~~ prand apple pies were being sold by Utah Pie. During

3 1959, the difference anes from 12 cents to 62 cents per.

. dozen ; during 1960, a 54 cents to $1:28 per dozen; and ,

| during 1961, from 58 cents to $1. 89 per dozen. 3

_. Plaintiff’s Exhibit 112. reflects the price lists and

es special deals offered by Pet in. Wyoming, Washington, —

3 ‘Utah, Oregon, Montana, Idaho, Colorado, southern Cali-

fornia’ and northern California, in 1958, 1959, 1960 and

' 1961.. A chart annexed hereto as Appendix aI ‘analyzes.

month by month the lowest absolute price offered. by Pet

-. for apple pie in each of such markets. By lowést absolute

‘price is’ meant the list’ price, less’ any deals offered,

whether direct discounts from the invoice. price or adver-.

tising allowances. [Apple pie figures are used, becausé it

‘is the volume leader, selfs at the. lowest price of the

frozen pies, and is the price indicator.)

The chart shows-the following :

Pet’s absolute price for apple -pie was uniform in

Wyoming, Utah, Montana, Idaho and Colorado from Janu-

. ary: 1958, through November, 1959; at no time during that

_ period was Pet’s price in Utah lower than “its- price in

any of ‘the other market areas; and during such period

Pet’s lowest price’ was always in’ northern - California,. |

southern California, Washington, or Oregon.

In December, 1959, -Pet’s Utah price was $3. 80 per

dozen, while its price in Wyoming, Washington, Oregon,

Montana and Colorado was $4.00 per ‘dozen, but in that

some month Pet offered ‘apple pie in northern California

for $3.70 per — and in southern California for $3.60

per. dozen..

During four months in 1960, Pet harsad less for apple

. pie in Utah than it did in somé of its other market areas, <

bat’ at all times during 1960, Pet’s Utah price was higher :

than its price in southern California. and was the same or

higher\ than its price in northern California.

In January and February, 1961, Pet? 's lowest offering

| price for apple pie was $3. 70 per dozen and was made ~ °

in Utah, \Montana and *Colorado; in March and April,

1961, Pet’s lowest offering price for apple pie was “$3. 56

per dozen and was made in Utah, Montana and. ‘Idaho;

and fronr May through August, 1961, Pet’s apple pie price es

in Utah was tle same or higher than its s.apple pie pribes

: in its other market areas.

ae May, 1958, through December, 1961. The seven cities” \ °

' in the. western states “are sold Serene: wholesalers in

Thus, i in only nine of the 44 siionithas ‘hoe inbubyed was -

‘Pet's 8 price:for apple. pie lower in Utah than in ABy_0 of

its other’ market areas, and i in only four hon ate 3 J ——P

Utah the lowest of any of its othe iikot arena,

Furthermore, a comparison: of Utah Pie’s absolute.

apple pie prices, shown by its Exhibit.91, and set forth

in a chart, annexed: hereto as Appendix III, and Pet’s

‘lowest absolute _ prices, reflected in Appendix II, shows .

that at no time during. the 44-month period of May, 1958,

through December, 1961, were Pet’s ‘Utah Bafes lower -

- than Utah Pie’s prices, _ i

Pet introduced a _ machine ‘iatieilan of invoices of [

[actual sales \of frozea” fruit pies by it to customers ‘in —

seven cities ‘in the .western states, during the period from\ ;

) ean

were selected because most of Pet’s frozen fruit pies sold

these cities.

ee |

. j

\ .

e t

- L

a Fan . 44

a - ,

Pet’s Exhibit. A-40 has particular relevancy to.Utah + —

Pie’s allegation of territorial price differetices, namely, + -

that Pet charged lower prices for its frozen fruit. pies in

the, Salt Lake City, market than it charged in the market

area. in which its pies, were made or in other avestern, |

‘markets. It shows the lowest invoice prices: at which Pef-

Ritz frozen apple pies were sold in Salt Lake City and -

the. six ‘selected cities, and we reflect the pertinent part |

‘thereof in a chart annexed hereto as Appendix IV. |

During the period covered: by the tabulation (44 months

; ‘in ‘all), the lowest price at which Pet-Ritz frozen apple

_-piesywere sold by Pet to wholesalers in Salt’ Lake City

was lower than the lowest price at which such ‘pies were.

sold by Pet to wholesalers i in Los Angeles, in only three

months—December, "1959, March, 1961, and April, 1961.

' The following’ table. lists these prices, as well as the

lowest price at -which he Pie sold frozen apple pies

ander its: Utah brand in Salt Lake City in tlie same

; months :

""Lowiet rice Charged for « Donn Prosen Apple Pie 9

E Pet-Rits > UtahPie

i [os Angeles Salt Lake City Balt Lake City .

December, 1959 $3.90. . | $884. . $3.60

. During the same period, the lowest price, at which -Pet- :

: Ritz frozen apple pies were ‘sold ‘by. Pet to whiolesalers

in’ Salt Lake City was lower than the. lowest. price at

which such pies were sold by’ Pet to wholesalers i in San

“Fraticisco in only seveh months-—December, 1959, August, é

1960, ar: , 1960, sees: 1961, February, 1961, |

cs : wre,

March, 1961, and- April, 1961. The following table lists

_ the lowest prices. at which Pet-Ritz pies were sold in

: / soak of the ‘cities during these months, and the lowest ~~

price at -which Utah Pie sold its 24-ounce Utah. brand

a apple pies in Salt Lake si mist g those months: ee

. "Lowest Pico Ohiged for « Doom Prose Apple Pit eee

: Pet-Rits . ‘ Utah Pie

_ vA | December, 1959 - $400.” $3.84, ° pe

"August, 1900 “~. 440.. ° .. 428 . 830 ,

- September, 1960: ‘a: 5a, ‘o..

co. ebruary,1961° ¢ 440. | ° 4.28 3.50

“oh Mareh, 1961 v 4.40 . 4.24 . 3.10

April, 1961 448 4.08" 3.50

; ! 2 yes

The number’ of 1 P t Ritz frozen apple pies ere in Salt [Pt

Lake City.at such lower. prices ‘is almost inconsequential.

.They were as: follows: ~ e 4

December, 1959° 125.0 dozen » February, 1961 27.5 dozen | | |

August, 1960 45.0 dozen March, 1961 ~ 27.5 dozen | ' ;

September, 1960. 52.5 dozen April, 1961» 25.0 dozen [\

January, 1961 12.5 dozen : ney

: : Total j§ 315.0 dozen

‘The introduction of the ‘economy’? Swiss Miss pie, by

Pet to enable it to compete with lower-priced | pies in

‘various markets has been.discussed earlier. One question

with respect to that pie remains. Was ‘it sold at lower

+ prices) in the, Salt Lake City market than in California,

-, where ‘the pies were manufactured?, Utah Pie’ introduced. ,

no eyidence whatsoever to sustain any burden of proving

\lower prices for Swiss Mise pies in the Salt Lake City

tet

market. The Swiss Miss pie was. first sold in Salt bike

' September, 1961. Exhibit A-40 also shows all the actual

-sales of Swiss Miss ‘pies in such seven western cities in in,

“1960. and 1961, and we reflect: the pertinent part hereof -

in that respect in a chart: annexed hereto as- Appendix V..

7: During only one of the intervening 13 monthe/ was. the ’

| lowest price at which the Swiss Miss apple pie was sold i in

‘Salt Lake City lower than the price at which the pie was

‘sold in San Francisco and at-no time-was the Price in Los

Angeles higher than the lowest price in Salt Lake City.

“<_ In addition, during this entire period, the price cf. the. :

Brest ‘N’ Flame pie, manufactured by Utah Pie, was al-

| ways lower than the price of the lighter (by four ounces)

_ Swiss Miss pie. The following tabulation permits a com-

ee | of the J Sa

— "Lowest Price Per Dosen—Apple Pies

iis *: "Swiss Miss Frost ‘N’ Plame.

peat. Salt Lake City Los Angeles San Francisco Salt Lake Oity _

August, 1960 $3.29 ° $3.05. $3.29 * $3.00

September 3.25 ; 3.05 oe ° im 3.00

’ «October Ro Se ee

November anti 3.05 eres ° eae

December .> 4 o.” \ 48.05 - 3.29 - 3.10

January, 196F 3.29 — 05 Ae > es 3.10 —

; Merch» 8255 + (8.06. - te ee 3.10’ .

June * 3.5 ME ORS ae

— g - 829-— 3.05 . | 3.29 0s * 2.95.

Angust mm a _“ OM. :. @ ay

at ‘indicates no sales ‘were made. in the month.

Even when Utah Pie’s prices for Frost ‘N’ Fhime were:

down to $2.75. per dozen i in J uly and — 1961, it made

_@ profit on its sales thereof.

Tw 198, Utah Pie sold 37,969.5 dozen pera pies in the

~ Sait Lake City market, which was. 66.5 per cent of the

‘total sales volume. In 1958, Pet Sold 9,336.5 dozen frozen

‘ . pies in that- market, which was 16.4 per cent of the total

sales volume. In 1958, neither Utah Pie’ nor Pet Sg

—

any Bel-air pies to ‘Safeway.

In 1959, Utah Pie sold 38,372 dozen frozen pisa in that -

market; which was°34.3 per cent of the total:sales volume.

In 1959, Pet sold 39,639 dozen frozen pies in that market, —

which was 35.5 per cent of the total sales volume. How-

ever, in 1959, in’ that market, ‘Utah Pie. ‘sold no Bel-air

frozen . fruit. pies to Safeway and Pet sold in that year.

. \25,462.5 dozen Bel-air frozen fruit pies to Safeway. Pet’s

market share, or percentage of total sales: volume in that

year, with frozen fruit pies sold to Safeway excluded, |

was 12.7 per cent.

" ioe

7 boas) ig Pie sold 83,894 dozen frozen pies in that

i roti hich was 45.5 per cent of the total sales volume.

. In 1960, Pet sold 51,480 dozen frozen pies in that market,

which was 27.9 per cent of the total sales volume. How-

ever, in 1960,.in that market, Utah Pie.sold no. Bel-air

frozen’ fruit pies to Safeway, while Pet sold 22, 694 dozen

‘Bel-air frozen fruit pies to Safeway, and Pet’s market. -

share, or percentage of the total sales volume, with the

frozen fruit pies it sold to Safeway excluded, " ‘was BS. 6

per cent, 4 ;

In 1961, Utah. Pie old 102,690 dozen frozen pies ~

that market, which, was 45.3 per cent of the. total sales

BS - t

JEL:

market, which was 29.4 per cent of the total sales vofume.

~ However, i in 1961, in that market, Utah Pie sold 1 no Bel-ai?

frozen fruit piés to Safeway, while in that year Pet sold

eway 14 14,897. 5 dozen frozen fruit pies, “and Pet’s -

market share or percentage of total sales volume, withthe

- volume. In 1961, Pet sold. 66 ,786 die frozen pies in that.

frozen fruit pies sold by it to iin asus was 22. 9 .

. per cent. |

a We have shown. Pet’s share of the snizit, with Bel-air *

frozen fruit pies‘ excluded, in 1959, 1960, and. 1961, ‘be- |

cause it was. clearly established by uncontradteted and

" " tncontroverted evidence that Safeway was not willing in .

those years to purchase frozen fruit pies from Utah Pie,

for the reason that it was unable’to persuade Utah Pie

to install’ “means and procedures that would insure uni- —

form quality of Bel-air frozen fruit pies produced by

Utah Pie and sold by it-to Safeway. In other words,

a Safeway, imposed as a condition to its purchase of: any

Bel-air frozen fruit pies from Utah Pie that such installa-.

tions be made by Utah Pie. The primary reason Safeway

imposed such conditions was that - it was unwilling to

risk damage to the fine reputation it was building up for A

stant high quality of such pies, through the unwitting sale:

by it of Bel-air pies, the quality of which fell below such

subjoined note 13. ‘It re that. Pet’s* sales of. Bel-air

pies being furnished it by Utah Pie were ‘below the quality the

latter. had agreed to maintain, both as to excess moisture content

of. pumpkin pies and the. nonconformity of- ingredients to stipu- -

~ lated Sorianles ~ both ee cwsd — mince Pies, and notwith-

Hhigh standard of quality. Other reasons are set forth in ‘

Fite, ©:

. frozen fruit. pies to Safeway in 1959, 1960, and 1961 took :

no frozen fruit pie business away from Utah Pie. ‘If

Pet had not sold the Bel-air frozen fruit pies to Safeway ise

in those years, the latter would have purchased them:

from some other manufacturer than Utah Pie, wo was

willing to meet. Safeway’s manufacturing conditions and

requirements.1*

- In 1958, the market share of sellers in the Salt Lake

_ City market, other than Utah Pie’s and the defendants’,

*was 5.5 ‘per cent, and in 1959 it increased to 18.7 per

: cent, a. gain of 13.2 per cent. The aggregate of such 13. Oe

wees per cent and the 22.8 per’ ‘cent of Pet’s market share at-

F tributable to Bel-air sales in 1959 ‘more than equals the

7 7 : percentage of market share decrease of Utah Pie in 1959

a sive of its sales of Bel-air pies to ‘Safeway, was only —. *

127 per: cent of the total™ market share, in 1959, while’

its ighare i in 1958 was 16.4 per cent, and that included the ’

4 Sales of all kinds of frozen pies. The loss Utah Pie suf- ”

pee ee if market - ‘share in 1959 was not erred in

' * anywise to Pet’s competition.

we _

F ; In 1960,. Utah Pie sold 4,608.5. dias tril minee and . |

5, 336.5 dozen frozen, pumpkin . Bel-air pies. to Safeway.. ee

my ny emg py Ulm Giny

evice by which Safeway could pinpoint a defective Pie, even te :

the day of its production.

14While Safeway would not purchase frozen fruit pies packed

under its Bel-air label from Utah Pie, for the reasons stated above,

it was a large purchaser of other frozen pies from Utah Pie. Utah ;

Pie sales..of other frozen pies to Safeway. were approximately

$1,500 dozen in 1958, 16;500 dozen in 1959, 22,000 dozen i in 1960,

and 18,000. dozen in 1961. .

In the years 1958 to 1961, ‘inclusive, . Pet sold no- mince nor.

— Bel-air pies to Safeway. .

ort

In 1961, Safeway requested Utah Pie to pack its Belair «

mince. pies in a new carton. Utah Pie advised Safeway. it

would not do so, unless it was- given Safeway’s frozen -_.

fruit pie business, then’ going to Pet..That Safeway would

not do. As a result, Safeway only. purchased 50 dozen

frozen mince pies from Utah. Pie in 1961, just enough ‘to

“Jet Utah Pie use up the old cartons and shipping cases

it had on- hand, but it, purchased 6,483 dozen Bel-air

*. frozen pumpkin pies from Utah Pie in that year. This »

further shows that Utah Pie’ s failure to sell frozen pies

to ‘Safeway was not due to competitors’ prices, but to -

Utah Pie’s unwillingness to. meet Safeway’s —

| mients. oe . at

Pet’s market share, iii of Bel-air frozen’ fruit

" pies sold to Safeway, increased in 1961 over 1960, 7.3 per

_ cent, but uncontroverted facts show. that gain did not

"result from a loss by Utah Pie. In 1960, Utah Pie sold

4,608.5 dozen Bel-air mince pies to Safeway. Due to its

unwillingness to use the new type carton Safeway re- -

quested, it sold Safeway only 50 dozen mince pies in |

1961. tt is apparent. that no problems with respect to new

_ cartons €xisted as to pumpkin pies, because Utah Pie .

sold Safeway 1,146.5 more pumpkin pies in 1961 than it —

_ did in 1960. The*only: reasonable inference is that had.

Utah Pie been willing to adopt the new carton for mince

pies, it would have sold Safeway at least as many mince

pies in 1961 as it did in 1960, and had it done so, its

, market share in 1961 would have been 46.8 per cent, in-

7 | j stead of 45.3 per cent. In 1960, Pet’s Swiss Miss sales

ey accounted for 11.1 per centof the total sales in the Salt

~ | ‘Lake City market, while its Pet-Ritz sales accounted for

| only 4.5 per cent thereof. In 1961, Pet’s Swiss Miss sales

om?

me '

en prone ia a)

eS aes : ae

- accounted for 21.2 per cent -of the total ‘sales in such

market, while its Pet-Ritz sales accountéd for only 1.7

per cent thereof. Pet’s increase in market share in 1961

was due solely to the increase in its sales of Swiss Miss .

pies, and that pie, on an ounce-for-ounce basis, was al-

ways sold at a higher price than Utah Pie’s Frost ‘N’

- Flame pie. In only one month, May, 1961, was Swiss Miss

'. sold at a sams! ak in San Francisco than in - Lake

ae ) vid tie

is Moreover, the market; share: yeteohiains of sellers i in the

Salt Lake City market, other than Utah Pie and the de-

fendants, decreased 4.5 per cent and‘their sales volume™

decreased 4,902 dozen in 1961; and it is reasonable to -

infer that. Pet’s market share increase in 1961 derived

-from such decreases suffered by such other sellers. But

in view of the fact that Utah Pie had a substantial sales |

volume increase in 1961 and would have had a market .

share percentage increase in that-year, had its sales of.

Bel-air frozen mince pies not substantially decreased due.

to its refusal to adopt a new carton, it would be un-

reasonable to infer that Pet’s ts resulted — any

sales loss by Utah Pie. 3

The total sales volume - ‘in * dle and the percentage

. of market share of Utah Pie and Pet in the Salt Lake

City market, with the Bel-air salés to Pet excluded, i in the

years 1958 to 1961, inclusive, were as follows:

‘Volume of Sales "Market Share ”

Pet UtahPie Pet ‘Utah Pie

1958 8,336.5 379695 164 665

1959 14,176.5 38,872 127 = 848

1960 . 28,786 $3,994 «156 45.5

1961 ~° — 41,888.5° — 102,960 229 - 453.

In 1962, Utah Pie’s volume increased to 129,658. Pet’s

volume and its and Utah Pie’s market share Hh ean ea

are not shown.i in the record.

- Even if Bel-air sales by Pet be included in its vein, ,

Utah Pie greatly outdistanced Pet in 1960 and 1961.

On June 23, 1960, Schenk, general manager of the

Frozen Foods Division of Pet, went to the Utah Pie plant -

in Salt Lake City, represented that lie was a frozen food

broker from the Northwest, and asked to be permitted to

go through the plant: Permission was granted and later -

Schenk prepared a report showing defects in Utali Pie’s

equipment and operations, to be used by D. -T. Dittman

of Pet in negotiating with Safeway for the latter’s busi-

ness in competition with Utah Pie. Of course, Pet’s con-

duct was ‘reprehensible and is not to be condoned. How-

-. every. the information contained in Dittman’s report was

never conveyed to Safeway personnel. Dittman so testi-

fied and so did Young, Safeway’s buyer. It thus appears

that the Dittman report was never uséd by Pet in its

" competitive efforts with Utah: Pie. ?

No. 7306

Factual Statement in the Continental Appeals |

These appeals involve two claims—the §2(a) claim as-

serted by Utah Pie. and. the $2( a) counterclaim asserted

by Continental.

Continental marketed its pies under ‘the brand, Mor- .

ton. It is an eight-inch, 22-ounce pie and is. lighter and .

- $l

- smaller than the pies of Utah x all of which are _—

inch, 24-ounce pies. -

- The counterclaim was based upon the differences be-.

tween the prices for which Utah Pie systematically sold

frozen pies, to retail chain. stores and the ‘substantially

* higher prices for which ‘it sold them to other customers

| in the Salt Lake City market. Such differences resulted

"from the sales by Utah Pie under private’ and controlled —

labels to favored customers, which it began in 1960.

. Under those labels, Utah Pie sold its only size, grade, .

and quality of pie to the large favored buyers at sub-.

stantially lower prices than other buyers were required

to pay: for Utah Pie’s regular Utah brand. For example,

in mid-1960 Utah Pie was selling its Utah brand frozen

pie for $3.60 per dozen, while it was selling an identical

pie under its Frost ‘N’ Flame brand exclusively to As-

sociated Grocers at. $3 per dozen. And on April 4, 1960,

Utah Pie by letter offered to sell Safeway, packed under

its Bel-air label and delivered to its warehouse in Salt —

_ Lake City, frozen apple pies at $3 per dozen and frozen

cherry and boysenberry pies at’ $3.30 per dozen. It was

also selling at that time its Sonny Boy brand for $2.88

per dozen, f.o.b. Salt Lake City, for delivery to —

in Spokane. .

On the other hand, Utah Pie’s aie aides Continen-

tal was: ‘based upon price differences to noncompeting

customers in. unrelated geographical areas. It is a ‘‘pri-

mary line’’. case. It. is mainly based ‘upon two ‘iso- |

_ lated two-week offers of its frozen pies, one made by

' Continental in June, 1961, and the other in ‘July, 1961 to

buyers in the alt Lake vee market at: Paiics when Con-

tinental was a marginal seller and Utah Pie was a domi-

nant seller in the area. : 7

It is apparent. that Utah Pie’s dramatic increase in .

sales volume in the years 1958 to 1962, inclusive, (see

table, page 59 [40] infra) in large part was due to the low

prices at which it sold frozen pies to Associated Grocers,

Utah Wholesale Grocery ‘and Safeway. Associated Gro-

cers was the largest buyer in the market, serving 150 to

175 retail stores out of its Salt Lake City headquarters. -

Beginning ‘in 1960 and continuing thereafter, Utah Pie

sold Associated Grocers pies under its controlled label,

Frost ‘N’ Flame. That pie, identical with the pie mar-

‘keted by Utah Pie. under its Utah brand, was exclusive

with Associated Grocers and was sold ata price 50 to

60 cents per dozen less than Utah Pie. charged non-.

favored competing purchasers for its Utah brand. Asso-

ciated Grocers’ tremendous competitive advantage, thus

attained, caused it to ‘support Frost ‘N’ Flame almost

exclusively in its advertising. It also. guaranteed Utah

Pie’s dominant position in the market by foreclosing the

largest buyer from éffective competition. Frost ‘N’ Flame

. quickly replaced Utah. brand as the leading brand.

Utah Pie also produced pumpkin and mince pies for

Safeway, the second largest buyer, under Safeway’s pri-

label, Bel-air, at prices substantially below those it

| charged for its identical pie sold under the Utah label

-.0 : to nonfavored competing stores. Utah Pie also continually

yt offered Safeway a preferentially low price on. its frozen

fruit pies packed under/ its Bel-air label. Safeway re-

jected those offers, not Jbecause of price, but for another

reason. fully set out in the Factual Statement in the Pet . .

Mads urvete Adak tad W olvtab ian. toe A

Appeal. In- its first year of sales of Bel-air mince and « .

‘ pumpkin pies to Safeway, 1960, Utah Pie charged what

Utah Pie later itself said was a ‘‘rock bottom”? price,

with the hope that it would induce Safeway to drop its .

then supplier, Pet Milk, in favor of Utah Pie,

In 1961,.Utah Pie began selling its private label May-"

fresh pies to Grand Central-American Stores, another of

the four large buyers in the Salt Lake City market. :

. The adverse impact on ,Utah Pie’s competitors | was

us very substantial. From ‘the time Utah Pie’ gave Asso-

ciated Grocers its controlled label preference, Continen-

tal was unable to sell - ‘Associated Grocers a single pie.

After Utah Pie. began its controlled label sales to Grand

Central Stores, Continental was unable to sell that com-

_ pany, and when ‘the arrangement was extended early in '

1962 to American Food. Stores, which had been acquired

by Grand Central, Continental lost the only chain that

had been a more_or less steady customer. Similarly, as to

Safeway, Continental, up to June, 1961, -was unable to

| make’ a single sale. In that month it made a sale to Safe-

way’s food stores in Salt Lake City.

Continental enjoyed substantial sales in the ‘Salt Lake

City market in 1957, but from 1958 to 1960, inclusive, it,

was. a negligible competitor in the Salt Lake City market.

With the advent of Utah Pie as a competitor in 1958,

Continental’s volume in dozens fell to 754 arid its mar-

ket share to 1.3 per cent. In 1959, its volume of sales in

dozens was 3,182 and its market: share 2.9 per cent. In

1960, its volume of sales in dozens was 3,350 and its mar-

. két share 1.8 per cent. In 1961, its sales increased and:

- its total volume in dozens of sales in that year was

yt iigs 84

: 18,799.5 and its market share 8.3 per ‘cent, but by the’

beginning of the fourth quarter of 1960, .Continental. had

a reduced the cost of. its pies laid down in Salt Lake City

ay i to a point where:it could more nearly compete with Utah

| Pie’s prices.in the Salt Lake City. market area.

Another basis of comparison is. the number of -times .

food retailers advertised Utah Pie’s brands and Conti- ;

~ nental’s Morton brand during the years 1957 to 1961,

inclusive. This, hecause the undisputed evidence clearly

established that: rétail newspaper advertising i is necessary

to frozen pie sales success. The following table shows the + ~ Z

‘number of times retailers advertised the respective .

brands of Utah Pie and Continental in the five-year

ee 1957. 1958 1959 1960 1961 4

Utah Pie oe mo fee =

Continental RR eee ees Ea el.

. ‘After the entry.. of Utah Pie into the Salt Lake City

market in~1957, with its -lower _pticed. pies, Continental, |

because of ith higher costs of production and transporta-

» tion, was unable to keep its prices’ competitive with Utah

' Pie’s prices. In 1960, with the advent oC Pie’s con-

, trolled and private label prices, Continental céased to

_| mints a sales representative in the market and was.

virtually out of: the market. However, Continental con- ;

‘tinued in an effort to reduce its costs of production in ~~

order to bécomé competitive. In 1960, it.was successful |

in locating” a. “‘eo-packing”’ operation in the heart of the

"California fruit growing region, ‘which permitted fruit to

be faa directly from: the trees into the finished Pie,

” :

: .

) 35 ‘i ; ;

-* j -

without eas intermediate packaging, storing, and ship-

‘ping expenses. By such efforts, Continental was able to .

reduce its cost of apple pies laid down at Salt Lake City

from approximately $3. 75. per dozen in 1958 to. approxi-

mately $2.80 per dozen in the second quarter of 1961.

See chart annexed hereto as Appendix VI. It was also

able to reduce its costs of : other flavors laid down in Salt

ge Lake City in comparable amounts. Having thus reduced

its costs, Continental was again in a position to offer its

Morton pies direct to buyers in the Salt Lake City mar-

ket at prices which.it hoped might prove to be competi-

tive. In October, 1960, Continental contracted with a Salt’ )

Lake City food broker in an effort to resume distribution —

of its full line of Morton frozen. fodd products in the —~

Salt Lake City: market. For seven months, from Novem- —

- ber, 1960, to June, 1961, the broker attempted to sell

Continental frozen pies at prices meas so ll

|... with Utah Pie’s Utah brand.

During that period. the broker called on the trade

‘throughout. the Salt Lake- ‘City market area, offering

various short-term price: conéessions in the form of ad-

vertising allowances on. Pies, as well as. other products '

in the Continental line. ‘On the frozen pies, these ‘price )

concessions ranged from $1.20 per dozen off the $4:50 list

, price on mince pjes to 84 and’ 70 cents per dozen off the

- $4.00 list price on. apple, cherry, and boysenberry’ pies,

respectively. At these net prices, Continental was able

to make only a total of seven sales to three small buyers

in the outlying areas of Ogden, Boise, and Pocatello. It

could make io sales to the major buyers, all located in |

Salt Lake City. The few sales it made did not adversely -

s : 36.

affect Utah Pie. During those seven months, Continen-

‘tal’s. best price offers, made .on the price-per-ounce basis

used by. professional buyers in comparing prices, - -were

competitive with prices offered by Utah Pie on ifs Utah

brand. By June, 1961, it seemed apparent that if. Con- -

_ tinental -was to recapture any portion of race market, =

* had to make better offers. ie

Continental was unable to sell ‘to ‘inal buyers in the

Salt Lake City area, because they lacked the refrigerated

storage space necessary to buy direct from Continental.

load: Utah Pie, with its plant in Salt Lake City, was the

only manufacturer who could feasibly sell directly to the

~ small buyers. Of the largest buyers, Associated Grocers —

was handling Frost ‘N’ Flame brand at $3.10 per dozen,

the lowest price on the market; Grand Central was about —

‘to close a deal with Utah: Pie for its own private label, —

Mayfresh, at the same prices charged Associated. Grocers;

and Safeway was buying its Bel-air frozen fruit pies ex-

- . elusively from Pet Milk, from whom it could purchase’

three brands, including its, own private. label, in cbm-

_——bined-truckload shipments: Confronted with that situation,

Continental’s. s broker recommended that it meet the price

. being charged to Associated Grocers and offered . to

Grand Central, by offering apple pies at $2.85 per dozen

-on*full truck “quantities. This was approximately the

‘ ounce-for-ounce equivalent of Utah Pie’ 8 $3. 10 price. In-

deed, Continental’s price was. 1 08 cents. per ounce and

Utah Pie’s price was 1.07 cents per ounce. In comparing

Continental’s pies were 22 ounces in weight and Utah -

amecennl

Pie’s pies were 24 ounces in weight: should be taken into

consideration. Professional buyers evaluate competing of-

fers on a: price-per-ounce | basis, although retail. pur-_

chasers do not always give attention to the differences

in the size of pies. Moreover, Continental’s price was for

full truck orders, only, while Utah Pie’s price applied to

orders of any size, down to a few dozen.

Continental approved the recommendation and a $2.85

—$2.89 delivered _price, depending on quantity ordered,

was offered for a two-week period to those few br ers

potentially able to buy’ from Continental. At the’ Same

time, : ontinental extended on a continuing basis for the

Sal e City market area an offer of 30 cents per

dozen freight allowance. At "aa Sap Continental

., Made sales to American Food in Ogden and to

- Associated Grocers in hahaa independent

branch in Pocatello, both of which had ‘previously pur-

chased Morton pies, and at the time of the, sale were not

purchasing from Utah Pie. : ~

In June, ‘1961, the merchandising manager for Safe-

way’s food’ stores in Salt Lake City, purchased 6,250

dozen frozen pies, their requirement for five weeks,!

from Continental, and in July, 1961, Grocers Wholesale

of Salt Lake City, a small wholesaler just starting in| |

-business, ordered 1,000 dozen frozen pies: from Conti-

nental. ;

15Young, the Safeway Frozen Food isda Manager, tes-

tified that he has no control over the brands of frozen fruit pies

that Safeway Division Managers purchase for their stores; that

they are ‘‘autonomous in their purchases’; and do not have to-

"- - gtock Bel-air pies; that he has to ‘‘sell them on Bel-air.”

"\Y4

_ 88

- Utah Pie responded to ‘Continental’s offer, which lasted

only two weeks and was once renéwed a month later for

the same period, by. reducing its price on all of its 24 -

- ounce apple pies, whatever the brand name, to $2.75: per

dozen and offering all’ the customers unlimited quantities,

to be‘ delivered in lots of any size. When Continental

learned of.such offer by Utah Pie, and the merchandising

manager for Safeway’ s food stores in Salt Lake City

urged it to further reduce its price, it agreed with him to

‘eancel an order he had already placed at the $2.85 price;

’ and also offered to cancel another order placed by

‘ American Food Stores, rather than reduce its price to

Utah Pie’s offer, but \American Food Stores did not elect

to cancel its order. During the period 1958 to 1962, in-

‘elusive, in the Salt Lake City market, Continental reached

its highest .sales volume in June and July, 1961. There-

after, its sales volume continuously decreased through

1962. Its 1962 sales volume was 8,685 dozen less than its

1961 volume. June and July, 1961, were also high sales

volume months for Utah Pie, higher than any of the five

_ preceding: months and many other earlier.months; and

_from July, 1961, on through 1962, its sales volume con-

_ tinued to increasé.. Its. sales volume reached a new annual

high in 1962, when it, showed an increase of 26,968.3 dozen

over 1961. Thus; Utah Pie effectively maintained its

- dominant position and. discouraged further efforts by

Continental to meet the low prices which Utah Pie con-

tinned to maintain throughout 1961 and 1962.

- Continental was able in 1961 to increase its iii to |

18,799.5 dozen and its market share percentage to 8.3, but

in 1962 its volume dropped to 10,114.5 ‘dozen, while Utah —

é i -39

;

_ Pie’s lias in that: year was 129,658.3 dosen, an in-

crease of 26,968.3. dozen over 1961. The record does not

reflect facts from which toarket shares can be computed. —

in 1962. ; Jie ;

Invoices of sales of. toiled pies 5 Continental in the

-Salt Lake City market ‘during the period 1958 to January, é

1962, inclusive, showed 142 items were sold at a profit

and three items, one in 1958, one in 1961, and one in :

January, 1962, at a loss, before allocation of overhead

costs. Its over-all sales showed a profit. before deduction

of ‘overhead. After such allocation, an overall: loss was

reflected. Had. Continental been able to develop a sub-

stantial volume ‘of sales i in such market, it no doubt would

have been able to realize a profit after overhead was

charged. But when it looked as though. its ‘efforts would

* become fruitful by the contract it secured with the Salt

Lake City Safeway stores and Grocers. Wholesale in 1961,

Utah Pie reduced its price on its Utah and: Frost ‘N’

Flame brands and the contract with ‘Safeway was can-

celled. , Utah Pie maintained its reduced ater fora _

» period thereafter. re °

- Utah : Pie also suffered a wr on its a of trou

pies in 1958, notwithstanding it captured 66.5‘; dot

of the Salt Lake City market‘area in that y sold

a large volume of pies; ‘and phctrnten low -

transportation and selling costs and its other competitive

advantages. Its low price in ‘1958 could not, therefore, be =~

justified by lower costs.. By a large increase in its volume

in 1959, 1960, and 1961,. it was able to make substantial

profits, just as it is fair to say Continental could have:

ie under the Simple Simon label, or brand. ‘Carnation made.

16Percentage of market for 4982; cannot be determined from

‘ak from 1961 on, had it succeeded in obtaining a ob.

stantial volume of sales. : ° ae

The following table graphically shows a comparison ‘of

. Utah Pie’s ‘and Continental’ 's respective sales volume and

market share percentage for the years 1958 to 1961, in-

elusive, and the sales volume for 1962"° in the Salt Lake

a City amarket. aay *

a Sales Volume . .

: inDozens/ _% of Market

1958 (Utah Pie 37,969.5. 66.5

< * (Continental 154 et

1959 -(Utah Pie: 38,372 . sR

_ > (Continental ~ 3,182 2.9

1960 (Utah Pie = 83,894 45.5

: : (Continental 3,350 1.8

> .1961 (Utah Pie 102,690 45.3

(Continental 18,799.5 8.3

; 1962 (Utah Pie / 129,658.38

- «(Continental . . 10,1145:

Iv-

No. 7308

“Factual Statement in the: Carnation Appeal

The claim against Carnation was triéd on the: ‘theory

of low prices in the Salt Lake City market and high -

prices in: the Los Angeles mate at which Carnation -

sold its frozen pies.

Carnation entered the frozen pie Disinans in 1955, by

| acquiting a Los Angeles company thén engaged in manu-

facturing and. selling frozen pies in Utah and elsewhere

substantial improvements in its predecessor’s plant at

, Oa

Torrance, California, (near Los Angeles) and radically .

altered its distribution system. At all times here.material,

Carnation marketed its Simple Simon. pies in ‘all western

markets, that is, Los Angeles, San Francisco, Portland,

Boise, Seattle, Spokane, Phoenix, Salt Lake City and.

Denver. Shortly after Carnation entered the field, the —

frozen pie business became highly competitive, marked

_by the introduction into the market of national- brands,

such as Pet’s Pet-Ritz, Continental ’s Morton, and a num-

- ber of other national brands. Also, in some of such na-

tional markets there were regional brands, such-as Mary

Elizabeth, County Fair, Frigid Dough, Chet’ s, and other,

and also those of local eemain i, such as Utah Pie,

with their brands. _ > ‘.

In order to. meet the competitive activities of aie

. manufacturers i in the various markets in which it sold its -

pies, Carnation developed @ program of special temporary

price reductions, varying from market area to market

area, and depending on local competitive conditions.

These programs were called ‘‘deals’’ in the: trade: li -

- some areas they took the form of advertising allowances,

identical with those described in. the General Statement -

of Facts, supra. However, in Utah the allowances were

not permitted to be considered in computing ‘‘cost’’ under

the Utah ‘‘cost plus six per cent” minimum markup law |

(13-5-7 Utah Code Anno. 1953). Carnation accordingly

adopted ‘‘off invoice’’ deals for Utah and other markets

where similar statutes were if effect. Both types of deals

ef had. the same competitive purpose, namely, to induce. the

‘retailer to purchase and advertise Carnation pies and

thereby meet. the. competitive tactics of other manufac-

. a te

turers havitig a like aim. All deals had two aspects in

_ common. They were of a temporary nature and .they: were

- offered to all purchasers alike in each market.

: Since” ‘deals . were directed at local competitive | condi-

: tions, they differed in duration, type and amount in.

_. each market area, so that Carnation’ s net prices in each

_ of the national market areas also frequently differed. At

': times during the period 1958 to 1961, Carnation’s prices

' . | im the Utah area were higher than those charged in the

' Los Angeles area and at times they were lower. There

was no relationship between the prices in the two areas.

_The price in each was determined by local Tn

conditions.

In addition to Utah Pie’s lower price structure, other

‘competitive conditions in the period 1958 to 1961 af-

fected the market price. and the market for Simple

Simon pies in the Salt Lake City market. In 1958, Safe-

way introduced a private brand; Bel-air,. manufactured

by the Pet Milk Company. Though of a similar grade

and quality, it was sold at a lower price than. Simple ;

Simon. In late 1959, Utah Pie introduced a controlled

_ label, Frost ‘N’ Flame, for marketing through Asso- -

ciated Grocers, | the largest group of cooperative biiyers

in. that market. In 1961, it introduced another controlled

label, Mayfr

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.