Utah Pie Co. v. Continental Baking Co. - 386 U.S. 685 (1967)
U.S. Supreme Court
Utah Pie Co. v. Continental Baking Co., 386 U.S. 685 (1967)
Utah Pie Co. v. Continental Baking Co.
Argued January 17, 1967
Decided April 24, 1967
386 U.S. 685
This suit for treble damages and an injunction by petitioner, a local bakery company in Salt Lake City, against three large companies each of which is a major factor in the frozen pie market in one or more regions of the country, charged a conspiracy under §§ 1 and 2 of the Sherman Act and violations by each respondent of § 2(a) of the Clayton Act, as amended by the Robinson-Patman Act. The major competitive weapon in the Salt Lake City market was price, and, for most of the period, petitioner, which had the advantage of a local plant, had the lowest prices. Each respondent at some time engaged in discriminatory pricing, and thereby contributed to a deteriorating price structure during the relevant period. Respondent Pet Milk sold pies to Safeway under the latter's label at a price well below that for its proprietary label pies; it sold an economy pie in the Salt Lake City market at a price which was at times lower than that in other markets, and it sold its proprietary label quality pies in Salt Lake City for some months at prices lower than those in California, despite freight charges from its California plant. Pet admitted sending a spy into petitioner's plant during its negotiations with Safeway, but denied using what it learned. Pet did not deny that it suffered losses on its pies during the greater part of the period involved. In June, 1961, respondent Continental Baking cut its price in the Utah area to a level well below that applicable elsewhere, and less than its direct cost plus an allocation for overhead. Carnation Co., whose share of the market slipped in 1959, slashed its price in 1960, and, for eight months of that year, its Salt Lake City price was lower than that in other markets, and that trend continued in 1961. The jury found for respondents on the conspiracy charge and for petitioner on the price discrimination charge. Judgment was entered for petitioner for damages, but the Court of Appeals reversed, holding that the evidence was insufficient to support a finding of probable injury to competition within the meaning of § 2(a). The court concluded that Pet's price differential to Safeway was cost justified, and that Pet's
other discriminations did not provide sufficient basis on which the jury could have found a reasonably possible injury to petitioner as a competitive force or to competition generally. It concluded that the conduct of Continental and Carnation had only minimal effect, that it had not injured petitioner as a competitor, and that it had not substantially lessened competition.
1. Section 2(a) does not forbid price competition, but it does provide that sellers may not sell goods to different purchasers at different prices if the result may be to injure competition in either the sellers' or the buyers' market unless such discriminations are justified as permitted by the Act. P. 386 U. S. 702.
(a) There can be a reasonably possible injury to competition even though the volume of sales is rising and some of the competitors in the market continue to operate at a profit. P. 386 U. S. 702.
(b) Section 2(a) does not come into play solely to regulate the conduct of price discriminators who consistently undercut the prices of other competitors. P. 386 U. S. 702.
2. The existence of predatory intent bears on the likelihood of injury to competition. Pp. 386 U. S. 702-703.
(a) There was evidence of predatory intent with respect to each of the respondents, and there was other evidence upon which the jury could find the requisite injury to competition. Pp. 386 U. S. 702-703.
(b) Section 2(a) reaches price discrimination that erodes competition as much as it does price discrimination that is intended to have immediate destructive impact. P. 386 U. S. 703.
3. Since the statutory test is one that looks forward on the basis of proven past conduct, the jury was entitled to conclude that, where the evidence showed a drastically declining price structure which could be attributed to continued or sporadic price discrimination, "the effect of such discrimination" by respondents
"may be substantially to lessen competition . . . or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination. . . ."
P. 386 U. S. 703.
349 F.2d 122, reversed and remanded.