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Macaroni v. Federal Trade Commission

decided: May 29, 1969.

VIVIANO MACARONI, CO., PETITIONER,
v.
FEDERAL TRADE COMMISSION, RESPONDENT



Kalodner, Ganey and Seitz, Circuit Judges.

Author: Seitz

Opinion of the Court

SEITZ, Circuit Judge:

This is a petition to review an order to cease and desist issued by the Federal Trade Commission (the Commission) based on its determination that petitioner, Viviano Macaroni Company (petitioner), has engaged in discriminatory practices prohibited by Sections 2(a), 2(d), and 2(e) of the amended Clayton Act, 15 U.S.C. ยงยง 13(a), 13(d), and 13(e), in connection with its sale and distribution of macaroni products to wholesalers and retailers.

Petitioner is engaged in the manufacture and sale of macaroni products, egg noodles, prepared foods, and sauces and sells primarily in an area within 150 miles of its manufacturing facility at Carnegie, Pennsylvania. This area encompasses western Pennsylvania and parts of Ohio, West Virginia, New York, and Maryland. Viviano's gross sales from 1962 to 1965 fluctuated from 3 to 4 million dollars, and since the late 1950's the competition among the various macaroni companies in the relevant area has been intense.

Petitioner's primary position on this appeal is that the discriminations as found by the Commission were made in good faith to meet competitive offers from rival macaroni companies. Such an affirmative defense is permitted by Section 2(b) of the Clayton Act to rebut a prima facie case of unlawful discrimination. Section 2(b) provides in pertinent part:

"* * * nothing * * * shall prevent a seller rebutting the prima facie case [of unlawful discrimination] by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor."

The United States Supreme Court elaborated the standard to be used in applying a Section 2(b) defense to a particular set of facts in its landmark decision, Federal Trade Commission v. A. E. Staley Mfg. Co., 324 U.S. 746, 89 L. Ed. 1338, 65 S. Ct. 971 (1946), where it stated:

"Section 2(b) does not require the seller to justify price discriminations by showing that in fact they met a competitive price. But it does place on the seller the burden of showing that the price was made in good faith to meet a competitor's * * *

"* * * the statute at least requires the seller, who knowingly discriminated in price, to show the existence of facts which would lead a reasonable and prudent person to believe that the granting of a lower price would in fact meet the equally low price of a competitor." at 759-760.

It is in light of the above formulation that we will examine the merits of petitioner's Section 2(b) defense as applied to the individual cases of discrimination, to which we now turn.

The Loblaw Transaction

In July of 1962 there was a change in the ownership and management of the All American Stamp and Premium Co. of New York which operated the Loblaw supermarkets. Up to that time, petitioner had been selling and delivering its products only to individual Loblaw stores. Loblaw, through its new management, indicated to several macaroni companies, including petitioner, that it was considering taking on a new macaroni line in its central warehouse for distribution to all its stores.

Accordingly, a meeting was arranged between John Dickson, Assistant Sales Manager of Loblaw, and Samuel Viviano of petitioner. It was held on January 2, 1963, and a second one was held later in the month. An agreement was reached with the following terms which were found by the Commission to constitute price discrimination in violation of Section 2(a) of the amended Clayton Act: (1) petitioner gave Loblaw free goods equal to the first two orders it placed for each of 29 of petitioner's products (the brand name is Vimco), without limit as to the size of the orders; (2) petitioner permitted Loblaw to pick up products at petitioner's plant and allowed it $1.69 per hundredweight on all invoices, including both purchases and free goods; (3) petitioner gave Loblaw throughout 1963 credit terms of 2%-20 days ...


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