# Petition for Writ of Certiorari — Utah Pie Co. v. Continental Baking Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386412_0013%3A16 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1967 - **Citation:** 386 U.S. 685 ## Text Se 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- - © damage actions under the Section 2(a) of the Robinsoli- 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 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 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 . 14 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 B 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 _ 16 - 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 AZ . - 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). e 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 22 ~ Idaho) ; called for losses of $12,648 in the Mountahh States 8 . ‘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 ~ - @ ae ‘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. —— OE : 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. 26 '- 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- oe 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 28 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 31 _- 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 ? > 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 : Fh 36 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 37 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 — & 4. “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 | * Vv 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. j? 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 CA sc machen sae 2 Soe ee hn he i a ee a a at a I Le AG ot nen manips ee nee A "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: | ca 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 a 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 © «there is. pridencs tack the price out: was initiated , 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 a eT 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 ‘ ; nental’ Denver discriminations (Tr. 488-499 ; “PL-Exs. T7- 39, * The Denver aba rename -were argued to ‘the °4 4 Z a ‘ ‘ - ° «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 2% 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.” . » 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. va 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 41 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 4 Hy ads 64M seis 97.9. 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 ~» “ ° ge ‘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. Ce Sa Nat 14 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-— 4.5 per cent; 1961—1.7 per cent. The decrease due © | 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 16 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 oe 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.) 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. 20 . 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, UtahPie i [os Angeles Salt Lake City Balt Lake City . December, 1959 $3.90. . | $884. . $3.60 March, 1961 §© 4.26. ‘ 4.24 A “oe April, 1961 4.26 | ! 4.08 © 3 ee . 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.. January, 1961 © 4.40 - 4.28 - B48 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 4 market. The Swiss Miss pie was. first sold in Salt bike Lv , City in August, 1960. The -present complaint was filed in © ' 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. “ 4 o.” \ 48.05 - 3.29 - 3.10 January, 196F 3.29 — 05 Ae > es 3.10 — February . © - 325. 3.05. Nok eee * 3.10 ; Merch» 8255 + (8.06. - te ee 3.10’ . April © 32% | | 305 ide 3, 3.10 ~ oe May 325 «© 305 .° 3.29. 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 WS 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 9 risk damage to the fine reputation it was building up for A : Bel-air frozen fruit pies by the maintenance of a con- © 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 Tin 1960 960, Safeway datos that the Belair frosen pumpkin © 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 ) _ from 1958. Moreover, Pet’s share of the market, ‘excly- ©. - 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 28 In 1961, Safeway requested Utah Pie to pack its Belair « mince. pies in a new carton. Utah Pie advised Safeway. it Sd 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. 30 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. ? Ii 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- ~ aa 32 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 . . ie z Mads urvete Adak tad W olvtab ian. toe A 33 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 - r oo 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. Continental could sell not less than a-quarter of a truck- © 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 prices with Utah Pie’s prices, the fact that © Continental’s pies were 22 ounces in weight and Utah - amecennl 87 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 e ; oo _ 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: oF ie under the Simple Simon label, or brand. ‘Carnation made. he 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 ~ 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 a , Oa é r 41 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, Mayfresh, for marketing through Grand Central _ American in that market. The effect of a controlled label - "is to tie the purchaser to @ single supplier. Such was the | effect here on amen Grocers and Grand cane ay | American. : ° Frost ‘N’ Hanks and Mayfresh pies were of similar i quality with — Simon and other brands sold i in os: 4 but were introduced and sold at prices considerably be- low Carnation’s prices for Simple Simon pies, as well as Utah Pie’s own Utahbrand. Utah Pie’s Utah brand and its Frost ‘N’ Flame brand were concededly —— pies with different labels. Utah Pie’s sales to Associated Grocers Saseematld from 18,621 cases in 1959 to 77,894 cases in 1960, and 102,834 | . cases in 1961, while sales’ in the entire Salt; Lake City market area only doubled i in size between 1959 and 1961. : The three largest. buyers of frozen pies in the ‘Utah market, whose advertising - set the Utah ‘market prices, were Associated Grocers, Safeway, and. Utah Wholesale Grocery. In 1961, Utah Pie sold to Associated Grocers nearly. nine times as many pies as “did Carnation, while in 1958, Utah Pie sold Associated Grocers only three.and one-half -times as many pies as did Carnation. By the end of 1961, Carnation was entirely out at Safeway, the He year in which Utah Pie sold Safeway 36,202 dozen frozen pies, including 6,533 dozen Bel-air. mince and’ pumpki pies and 11,568 dozen pies under Utah Pie’s own brand. In 1958, Carnation sold four times as many pies as Utah Pie to Utah Wholesale Grocery, but in 1961, Utah Pie sold six and one-third times as many pies as did’ Carnation % to Utah Wholesale Grocery. During the four-year period, © ¥ Utah Pie’s sales to the ‘‘big three’’ were over 240,000 dozen, while Carnation’ s were less than 30,000 dozen. ‘Utah Pie’ s books. showed that for the fiscal year: 1957, the last year in which it was engaged solely in ‘the fresh ‘ pie’ business, it lost approximately $5,500. In its fiscal year 1958, when it seized. 66.5 per cent of the frozen pie ° * market through its price cutting. activities, it had an op- ie erating loss of $1,264.51. During each of the fiscal years’ . 1959, 1960, and 1961, it showed a substantial profit. To make the comparison between Carnation and Utah Pie more graphic, we set forth in subjoined note 17, in parallel vertical columns, the percentage of the market share in the Salt Lake City market; and in like columns ‘the volume of sales in dozeris by Carnation and Utah Pie - ~ in each of the years 1958 to 1962, inclusive. — : Carnation’s total sales volume in the Sale ‘Lake City ‘market, in 1957 was 9,286 ddzen. But in 1958, in a rapidly * 17Market Share 1958 Carnation—10.3% Utah Pie—66.5% 1959 Carnation— 8.6% Utah Pie—34.3% ~ 1960 Carnation—12.1% Utah Pie—45.5% . - 1961 ° Carnation— 8.8% Utah Pie—45.38% > es Sales Volume : 1958 Carnation— 5,863 doz. Utah Pie— 37,969.5 doz. 1959 Carnation— 9, 625 doz. Utah Pie— 38, 372 doz. ° - 1960 Carnation—22, 871.5 doz. Utah Pie— 83, 894. doz. 1961 Carnation—20,067 doz. Utah Pie—102, 690 .doz. 1962 Carnation— 5,329.5 doz.* (A lower level than any of » the preceding five years.) Utah Pie—129, 658. 5 doz.* *Record does not reflect total sales volume for 1962,. hence’ ‘per- centage market share cannot be computed. Frozen apple -pie is ‘the ‘volume leadér and price indicator. The frozen apple pie sales in the Salt Lake City market from 1957 to 1961, inclusive, of Utah Pie and Carnation, and of Carnation in’ * 1962, were as follows: "195719581959 19601961 1962 _ Utah Pie . 893.5 10,312 13,285 27,225 46,791.5 ) «4957S 1958 «=s«d1959)=Ss«d1960" 1961 1962 . : (12 mo.) ° -. io. ae Carnation’ §=—3,284.5 2,391 3,164. 8,455.5 °6,885.5 1,802.5 Another basis of comparison is retailer’s advertising. In 1961, retailers advertised Utah Pie’s brands 72 times and Carnation’ s only four times. ies a mC Bx p> | : expanding market, its volume was only 5,863 dozen. Moreover, its sales volume did not keep pace with the rapidly expanding Salt Lake City market in 1959, 1960 and 1961, and in 1962 its its volume in that market fell to - an all-time low of 5,329.5 dozen. a > Appendix VII, annexed hereto, is a chart which sete forth month by month in the first, second, third and fifth ‘columns of figures the lowest absolute prices offered by -- Carnation for apple pie in the San Francisco, Spokane, | Denver and Salt: Lake City markets, and in the [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386412_0013%3A16. Public record. Not legal advice.