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BROSIOUS v. PEPSI-COLA CO.

March 15, 1945

BROSIOUS
v.
PEPSI-COLA CO. et al.



The opinion of the court was delivered by: WATSON

The plaintiff, William G. Brosious, by this suit seeks recovery of treble damages from the defendants, Pepsi-Cola Company and Cloverdale Spring Company, under the Anti-Trust Act of July 2, 1890, 15 U.S.C.A. §§ 1, 2, 15, on the ground that the defendants, pursuant to an alleged unlawful conspiracy, refused to sell the manufactured products of the Cloverdale bottling plant, which included Pepsi-Cola, to the plaintiff unless he refrain from buying, selling, or handling soft drinks made by independent manufacturers who were competing with the defendants for the trade of the public, and also comply with certain standards set up by the defendants.

The case came on for trial before the court without a jury and, at the conclusion of plaintiff's case, the defendants moved to dismiss the action. This motion is now before the court for disposition.

 Findings of Fact.

 The Pepsi-Cola Company is the owner of the registered trade name and trade-mark 'Pepsi-Cola'. By agreement entered into on November 6, 1934, the Pepsi-Cola Company appointed The Cloverdale Spring Company as its exclusive bottler, to bottle and distribute the beverage known as Pepsi-Cola in fourteen counties in Pennsylvania, three counties in West Virginia, two counties in Virginia and one county in Maryland. Under this agreement, The Cloverdale Spring Company agreed, among other things, to operate a clean bottling plant at Newville, Pennsylvania, to make bottled Pepsi-Cola in accordance with the formula set forth in the agreement, to push vigorously the sale of Pepsi-Cola in the territory through jobbers, salesmen and distributors to the satisfaction of Pepsi-Cola Company, to sell Pepsi-Cola only in cases of twenty-four bottles of twelve ounces each at a specified price, and to fix a specified price in the territory for resale to retailers. The Cloverdale Spring Company also agreed not to handle any other beverage with the name Cola, or any beverage which could be confused with Pepsi-Cola. The Pepsi-Cola Company agreed to sell to The Cloverdale Spring Company its requirements of a certain 'secret merchandise', which is Pepsi-Cola concentrate, at a specified price.

 The Pepsi-Cola Company manufactures the Pepsi-Cola concentrate at its plant at Long Island City, New York. In 1941, the Pepsi-Cola concentrate purchased by The Cloverdale Spring Company was delivered in ten gallon metal containers to truckers at the Pepsi-Cola Company plant at Long Island City, New York, and transported by the truckers to the plant of The Cloverdale Spring Company at Newville, Pennsylvania. The bottled Pepsi-Cola is manufactured by The Cloverdale Spring Company at its Newville plant in accordance with the formula set forth in the agreement with the Pepsi-Cola Company. One part of the concentrate purchased from Pepsi-Cola Company is mixed with four parts of filtered sugar syrup; and two ounces of this completed syrup and ten ounces of carbonated water go into each twelve ounce bottle of Pepsi-Cola.

 All bottled Pepsi-Cola sold by The Cloverdale Spring Company to distributors for resale outside of the State of Pennsylvania is sold at the Newville plant to the distributors, who load and transport it on their own trucks.

 For a period of about six years prior to April 3, 1941, The Cloverdale Spring Company sold bottled Pepsi-Cola to the plaintiff for cash at its plant at Newville, Pennsylvania, and the plaintiff resold and distributed this Pepsi-Cola within the State of Pennsylvania. The Cloverdale Spring Company discontinued sales of Pepsi-Cola to the plaintiff on or about April 3, 1941, and has sold no Pepsi-Cola to the plaintiff since.

 About March 31, 1941, plaintiff was asked by representatives of The Cloverdale Spring Company to enter into a different arrangement for the marketing of Pepsi-Cola. He was asked to take a larger territory, handle Cloverdale products which included Pepsi-Cola exclusively, and paint his truck in accordance with Pepsi-Cola Company's specifications, with no assurance that he could retain the territory so offered. The plaintiff refused to enter into such an arrangement, and The Cloverdale Spring Company refused to sell bottled Pepsi-Cola to him. On or about April 3, 1941, plaintiff went to New York City and interviewed some of the officers and representatives of the Pepsi-Cola Company. He was told by the General Manager of Sales that 'it was the policy of the Pepsi-Cola Company to back up their franchise bottlers, and they would do so in this case.' He was also told by some representative of the Pepsi-Cola Company that 'it is not our policy to tell our franchised bottlers what to do but, if sales drop off in any particular territory, then we step in.' Later, he was informed by letter from the Pepsi-Cola Company dated April 5, 1941, that 'there is nothing further we can do for you in regard to the matter we discussed when you were here in this office.'

 Discussion.

 Sections 1 and 2 of the Sherman Act which the plaintiff contends the defendants violated, provide, in so far as pertinent, as follows:

 '1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal; * * * .'

 '2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor.'

 Three questions are here presented: (1) Was there a conspiracy between the Cloverdale Spring Company and Pepsi-Cola Company pursuant to which sales of Pepsi-Cola to the plaintiff were discontinued? (2) Were the sales of Pepsi-Cola from The Cloverdale Spring Company to the plaintiff sales in interstate commerce? (3) Was there an unreasonable restraint of interstate commerce proven, or can it be inferred from the evidence?

 As to the first question, it is my opinion that the evidence will not support a finding, that a conspiracy existed between The Cloverdale Spring Company and Pepsi-Cola Company pursuant to which sales of Pepsi-Cola to the plaintiff were discontinued. However, as the case will be decided on another point, it may be assumed for the purpose of this discussion that sales of ...


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