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BOOTH BOTTLING CO. v. BEVERAGES INTL.

July 17, 1973

BOOTH BOTTLING COMPANY, INC., Plaintiff,
v.
BEVERAGES INTERNATIONAL, INC., et al., Defendants


John Morgan Davis, District Judge.


The opinion of the court was delivered by: DAVIS

John Morgan Davis, District Judge.

 Presently before this Court is a complex anti-trust case in which two Motions have been submitted for ruling. One submitted by the Plaintiff, Booth Bottling Company, Inc. (hereinafter "Booth"), requests this Court grant partial summary judgment on count 1 of the above captioned Complaint. The second Motion, submitted by Beverages International, Inc., (hereinafter "Beverages"), and Crush International, Inc., (hereinafter "Crush"), is a request to dismiss count 3 of the above captioned case as to Defendants' "Beverages" and "Crush" only. The Court will consider the Motion for partial summary judgment first after a short discussion of the history and facts in this case.

 I. DISCUSSION OF THE FACTS

 The Plaintiff filed its Complaint in 1970 under Section 4 of the Act of Congress, October 15, 1914, 15 U.S.C. § 4, alleging violations of §§ 1, 2 of the Sherman Act, 15 U.S.C. §§ 1, 2; and § 7 of the Clayton Act, 15 U.S.C. § 18. "Booth" is also alleging a breach of contract in count No. 4 of an alleged subfranchise agreement. The only count which we are concerned with in the Motion for Partial Summary Judgment is count 1, which alleges a violation of § 1 of the Sherman Act.

 The facts in this case indicate that "Beverages" is the owner of a product and trademark called Hires Root Beer. "Beverages" contracts to various bottlers and distributors throughout the country the right to bottle and distribute their product. "Beverages" contracts to sell the syrup to the bottler distributor who then manufactures and distributes the product under the Hires label. In this case there is a franchise agreement, included in the Brief of the Plaintiff "Booth", which indicates that there was an agreement between "Beverages" and Pepsi-Cola Bottling Company of Pennsauken (hereinafter "Pepsi") to manufacture and distribute Hires Root Beer within a certain designated area in the Delaware Valley of New Jersey, Delaware and Pennsylvania. What control "Beverages" maintains over the final product is unknown to this Court. As the defendant "Beverages" owns the trademark, there must be some control of the product sold under the trademark as far as quality and other standards are concerned. The remainder of any facts which are known to the Court at this time will be developed as it rules on the two Motions which are before it.

 At this time discovery is essentially complete and the parties are prepared for trial. The Court in effect has the full discovery record before it but it does not have a full trial record which it feels is an essential ingredient in a determination of a complex anti-trust case such as this one.

 II. VERTICAL INTEGRATION

 "Booth" has submitted to this Court a Motion for Partial Summary Judgment on Count 1 in which the main thrust of the argument is that there is a per se violation of the Sherman Act because the defendants "Beverages" and "Crush" have placed vertical restrictions on the sale of the product, Hires Root Beer, by imposing territorial boundaries in the Delaware Valley Area. They contend that such vertical restrictions are a per se violation of the Sherman Act; and this factual situation is completely covered by the law and factual situation presented in the case of United States v. Arnold Schwinn and Company, 388 U.S. 365, 87 S. Ct. 1856, 18 L. Ed. 2d 1249 (1967). The Plaintiff also contends that the factual situation in Schwinn is extended by United States v. Glaxo Group Limited, 302 F. Supp. 1 (D.D.C. 1969).

 Before discussing the present factual situation as related to the most recent cases, a short history of vertical integration is warranted. Vertical integration or restriction is a term that first finds itself in the legal terminology of anti-trust cases in United States v. Yellow Cab Co., 332 U.S. 218, 67 S. Ct. 1560, 91 L. Ed. 2010 (1947). The Supreme Court said at 227, 67 S. Ct. at 1565:

 
The fact that these restraints occur in a setting described by the appellees as a vertically integrated enterprise, does not necessarily remove the ban from the Sherman Act. The test of illegality under the Act is the presence or absence of an unreasonable restraint on interstate commerce. Such a restraint may result as readily from a conspiracy among those who are affiliated or integrated under common ownership as from a conspiracy among those who are otherwise independent.

 The fact situation in Yellow Cab is similar to many of the other cases in which vertical restrictions have been alleged against the defendant, i.e. the defendant has attempted to retain the immediate control of a product after he has sold it to a distributor by restricting the sales of the distributor.

 The Supreme Court in attempting to give guidelines as to the legality of vertical integration under the Sherman Act stated in United States v. Paramount Pictures, 334 U.S. 131, 174, 68 S. Ct. 915, 92 L. Ed. 1260 (1947) that there are two considerations that must be taken into account in analyzing vertical restrictions or integration. First, the purpose or the intent with which vertical integration was conceived and second the power it creates in the attendant purpose or intent. Thus, this Court feels that it is required to look behind the facts as presented in an attempt to determine the intent of the corporations involved. The best way this Court knows of determining intent is to question and examine the witnesses themselves as only in that manner can innuendos, nuances of meaning, and credibility be determined by the Court in the trial of the facts.

 In the case of the United States v. Columbia Steel Co., 334 U.S. 495, at 527, 68 S. Ct. 1107 at 1124, 92 L. Ed. 1533 ...


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