*1 CATALANO, INC., al., et on behalf of similarly all

themselves others

situated, Plaintiffs-Appellants, SALES, al., INC.,

TARGET et

Defendants-Appellees. 77-2221,

Nos. 77-2222. Court Appeals, States

Ninth Circuit.

Aug. 1979.

Rehearing Oct. Denied *2 SNEED,

Before WALLACE Circuit *, Judges, BLUMENFELD District Judge. Judge:

SNEED, Circuit conditionally class Plaintiffs, certified a doing business within the of beer retailers ruling a area, Fresno from that de- appeal fixing alleged fendants’ credit rather per illegal, was not se but must proven the rule reason stan- illegal under Catalano, dard. Inc. and C & Food C Marts, Catalano), (hereinafter Inc. two plaintiffs, appeal named also from a sum- mary judgment court adjudg- of the district ing inju- plaintiff that neither had suffered ry appeals in fact. were consolidated. Both ruling We district court’s affirm the alone, standing was fixing, credit not an subject se reverse the illegality. rule of district judgment summary court’s entry of for Catalano and remand Catalano’s claim proceedings. further I. BACKGROUND FACTUAL claim that Plaintiffs-appellants defend- wholesalers, beer ants-appellees, various conspiracy to engaged in a restrain have trade of section 1 violative Sherman plaintiff sought Act.1 class retailers alia, establish, inter defendant Samarco, Fresno, Cal., James P. William conspired wholesalers eliminate deferred Orrick, Herrington, Riley, Rowley L. & Sut- payment specifically short term cliffe, (argued), Jack B. Owens Francis- San formerly granted trade them on credit co, Cal., plaintiffs-appellants. for purchases.2 McCutchen, Black, Doty, G. Richard Ver- an order from the dis- sought Plaintiffs leger Shea, Cal., Angeles, Los J. Wallace alleged declaring the credit fix- trict court MacMichael, Upton, Kimble, Up- Jackson D. agreement, violative ing proven, if se of ton, Cal., Fresno, Frame, Ted R. Frame & district court refus- the antitrust laws. The Cal., Coalinga, defendants-ap- for Courtney, sought ed to so then rule. Plaintiffs pellees. interlocutory appeal from district pursuant se issue

court’s ruling on the 1292(b). The to 28 district court U.S.C. § * Blumenfeld, conditionally Joseph Dis- 2. district court certified Honorable M. Senior Connecticut, plaintiffs’ Judge trict District of sit- to include those retailers class ting by designation. prior whom extended credit the wholesalers alleged agreement to terminate the credit provisions. U.S.C. 1.§ granted agree we We cannot properly certified issue and that on this record permission appeal. terms amounts to to fix credit meaning indirect within the Contemporaneous request with the Ry. the antitrust laws. Northern Pacific declaring per, the order violation, sought defendants a motion for *3 518, (1958), 2 L.Ed.2d 545 established the summary judgment against plaintiffs Cata- per illegality rationale for in antitrust asserting they lano failed to establish “[Tjhere agreements suits: are certain injury in fact. The district agreed, court practices pernicious of their which because granted the motion for summary judgment, effect on and lack competition any re- appealed and Catalano therefrom. conclusively presumed deeming virtue are granted We a motion to consolidate the to and illegal be unreasonable therefore two appeals. precise elaborate as to the they harm have caused or the business ex- QUESTIONS II. PRESENTED acts, cuse for their use.” Particular presented by Two issues are ap- these one, which is have been held so First, peals. did the district court err anti-competitive plainly as to be conclusive- ruling agreement among that a horizontal ly presumed illegal. fixing of credit wholesalers to eliminate credit on retail terms, hand, on the other “manifestly sales would not constitute a se violation anticompetitive.” agreement An Second, of the antitrust laws? did the dis- credit, sale, “non-price” may condition of by granting summary trict court err judg- actually competition. Proper enhance anal- against plaintiffs ment Catalano on the ysis agreement reveals “that fixing an non- ground they failed to demonstrate the price trade items may help either or hurt existence of fact? We shall competition, depending upon industry struc- turn first to the se issue. Sullivan, ture.” L. Handbook of the Law Antitrust, 99, (1977).5 Thus, at 277 § an agreement III. THE PER to SE eliminate credit could sharpen ISSUE competition price by with respect remov- support To their contention that an ing perceived barrier some sellers to alleged agreement among horizontal Moreover, entry. competition market could distributors to formerly eliminate free short visibility be the increased fostered term trade credit should be considered as price possible by agreement made se, illegal per plaintiffs argue (1) that: example, an agree- eliminate credit. For fixing Price subject to a se evaluation might ment to eliminate credit foster com- (2) under the Sherman Act.3 Under the petition by increasing visibility pertinent price fixing may standard be ac term, hence, complished (3) promote open price and directly or indirectly.4 An agreement competition to fix credit in an in which prices imper- terms fixes indirectly. (4) fixing As a fect is a information shielded various sellers per se violation of the antitrust laws. vigorous competition. from Co., Socony-Vacuum open reduced, inevitably 3. United States v. Oil sellers will be as (1940). U.S. product S.Ct. 84 L.Ed. 1129 are when the is standardized. non-price But the standardization of Plymouth 4. terms, Dealers Assoc. v. United product, like standardization will (9th 1960); 279 F.2d 128 Cir. National Macaro have other effects. It will in a sense serve to Commission, ni Mfrs. Assoc. v. Federal Trade single, channel all transactions into a better (7th 1965). 345 F.2d 421 Cir. market; easily integrated buyers will more opportu- compare be able to their alternative standardizing 5. The effects of an terms, nities as to most the unstandardized non-price vary terms will much as will an notably price, likely more and sellers will standardizing product. By such competitive offerings. aware of variety offerings open standardization Sullivan, L. at § 277-78. buyers competitive differentiation States, 356 Ry. Pacific readily acknowledge that Northern may be in violation fix credit L.Ed.2d U.S. pursuant made laws when fixing of the antitrust term say that credit We cannot fix or as to a conscious always always tend to “would almost compe to restrain overall scheme part of an competition output.” decrease restrict Var Cook tition. Arizona v. Paint See better, believe, we to rest an antitrust It is Co., F.Supp. (D.Ariz. n.2 nish economic effects violation on demonstrable 1976); aff’d, (9th 1975), Cir. 541 F.2d 226 drawing.” than line rather “formalistic Gypsum Products Co. National Wall V., Sylvania, T. GTE Continental Inc. v. Thus, were (N.D.Cal.1971). F.Supp. Thus, supra, 433 primarily respect of credit legality to determine the where, ex on credit centered competitive detriment or evaluation *4 by govern prices fixed ample, explicit are in each situa- enhancement must be made terms ment, fix credit agreement tion. And, fixing. of would amount course, terms as agreement to fix credit reason, Application the rule of of contra effort to fix would part of an however, invariably does not necessitate vene the antitrust law. agreement that a conclusion horizontal trade Under eliminate credit is lawful. it has juncture proceeding At this of the any rule of reason concerted action violates not established that been purpose Act if the Sherman its effect purpose, or had entered into with was competition. significantly impair would effect, restraining price competition moreover, reason, “does The rule not industry. Simply labeling concerted inquiry open the field of antitrust proof as conduct argument challenged in favor restraint of a justify ap- to affect will not may of reason.” that fall within the realm plication of a se rule. “The antitrust substance, form, Engineers Society concern not in the National laws Professional Sullivan, 679, 688, preservation of L. 98 competition.” 435 S.Ct. U.S. 74, supra, at 198. As a we refuse 1355, (1978). requires It § 55 L.Ed.2d 637 fixing agreement to characterize the credit of the of credit impact examination price fixing. here before us as conditions, competitive on and such an only competition can benefit if it we Our conclusion is reinforced when operation improves the of the market. L. se consider the function of rules in Sullivan, supra 100 at 280. § particular A antitrust law enforcement. inherently which is practice established special char Any argument anti-competitive the need for eliminates industry render mo acteristics of the beer may ille- analysis elaborate be deemed arrangements better nopolistic trade gal per applicabil- se. Determination competition than is foreclos and commerce ity illegality turns on whether the Engi Society ed. National of Professional practice “appears to one that would al- be States, supra, 435 at neers v. United U.S. ways or always almost tend to restrict com- 689, 98 S.Ct. petition output and decrease ... legislative a Sherman Act reflects designed instead one ‘increase economic judgment ultimately competition that efficiency and render markets more rather ” only produce prices, will not lower but Music, competitive.’ than less Broadcast goods also better “The and services. Inc., Broadcasting System, Inc. v. Columbia policy long heart of our economic 1, 441 national 20, 1551, 1562, U.S. 99 S.Ct. 60 competi- has been faith in the value (1979); L.Ed.2d 1 v. United States F.T.C., v. 340 422, n.16, tion.” Standard Oil Co. Gypsum 438 441 98 S.Ct. U.S. 240, 95 L.Ed. 239. 2864, (1978); 57 L.Ed.2d 854 see Continental U.S. S.Ct. 36, competition is the V., assumption Sylvania, T. Inc. v. GTE U.S. n.16, (1977); allocating resources 53 L.Ed.2d 568 best method of recognizes papers granted, free market all elements motion be should service, bargain quality, safety, must opposing party controvert — durability just the immediate showing. and inferences All evidence are —and cost, favorably are affected the free light in a most favorable to viewed among to select alternative opportunity motion. Mutual party opposing the assuming excep- occasional offers. Even Management Fund Investors v. Putnam presumed consequences tions to the of Co., (9th 1977). In F.2d Cir. competition, statutory policy pre- general antitrust standards context question cludes into the whether granting summary judgment are good or bad. applied stringently. even more See Poller Id. underlying at 1367. The Inc., Broadcasting System, Columbia premise is that “unless the market L.Ed.2d rigged, either concerted or by excessive concentration and interde- The district court concluded that the action, pendent the market when left alone cessation on of credit wholesale distribution ought adjust to consumer interests with caused no plaintiffs. fact to Sum responses at least as fine as those which the mary judgment plaintiffs Catalano concertedly agree upon.” could L. was upon based determination there Sullivan, at 281. § genuine was no issue of material fact re *5 Application of the rule reason to the of This, garding injury turn, the in issue. facts presented may unlikely here be upon deposition Joseph rested the of Catala require an elaborate into the effects no, principal owner the two Catalano on industry. agree- the beer A horizontal that, except businesses. He stated the among eliminating ment distributors de- beer, possibility selling paying more cash ferred payment leaving while all profit for beer effect on had no loss. subject forces, other competitive terms Also, he could not estimate how much more may well agree- be unreasonable. Such profit might been made had beer been have ment impair competition. tends to The on sold credit. ease with the may which rule of reason applied not, however, justi- motion, ease does Opposing plaintiffs this also the relied fy the of a invocation rule. must on deposition. They Catalano’s contended possibility open remain the that situa- have fact that Catalano could sold tions will where occur such an more beer but for the cutoff of credit might competition. work to increase See presented Additionally, a material issue. id., 100, § at 281. they, subsequent relied on affidavit which Catalano testified: IV. SUMMARY JUDGMENT companies Both my always have Turning summary judg to the kept checking money in accounts more against Catalano, ment we note that under absolutely than necessary . . 56(c) Fed.R.Civ.P. burden on the “[t]he credit, When cut off some defendants party moving summary judgment money put this to be into inven- had beer show the absence of any genuine issue of tory. my As a were companies fact, and, material in determining whether liquid less were before . than met, the burden has been . . . [the [T]hey my companies deprived op- must draw all inferences of fact court] portunity money in time de- put the movant and in favor of the posits, where it would have inter- drawn party opposing the motion.” Calnetics est America, Corp. Volkswagen Inc., (9th Plaintiffs further controverted mo- 1976), denied, F.2d Cir. cert. testimony expert tion of an witness in 50 L.Ed.2d 309 appears Once it from movant’s the field He that a of finance. stated ter- showing a sufficient made plaintiffs The ef- has an averse of trade ruination fact. of material genuine issue company business. fect on “[I]f fact a material injury is of an existence ... inventories finances issue Catala- genuine made a sufficiently reserves, firm’s its cash drawing down expert sales and of lesser claim no’s strength are re- its financial liquidity and injury did exist.6 testimony that witness’ in the value of a decrease resulting in duced showing of adequate made Plaintiffs sum, of the he was In enterprise.” agreement, flowing from damage some suffered financial in- opinion plaintiffs goes point minimum beyond this “inquiry to end jury a result fact of and not the amount only to the credit. Hazeltine Corp. v. damage.” Radio Zenith reasoned because The district court n.9, Research, Inc., 395 U.S. specify how much more Catalano could (1969), n.9, 23 L.Ed.2d sold, much been or how might have Review, Inc., Daily accord Knutson v. made, been he suffered have profit might 1976). (9th Cir. F.2d claim rejected also court injury. no Part, and Remand- Reversed Affirmed surplus when can be suffered that an ed in Part. inventories even utilized to finance cash accompanied no bor- use is though such BLUMENFELD, (concur- Judge District cash. of additional investment rowing or dissenting): ring and It failed to distin- court erred. The district decision of agreement with the I am in injury in of an the existence guish between reversing the lower court’s by which the amount the means fact and judgment against summary grant of damage can be measured. damages; how- the issue of plaintiffs on ever, majority, I would hold contrary to the inability Plaintiffs’ alleged horizontal directly on the bears profits of lost amount *6 credit on among wholesalers to eliminate damages rather than the issue of amount of a se constitutes sales of beer to retailers inability injury. Catalano’s existence of an laws. of the antitrust violation that damages does not mean to estimate his suffered; nor does it bar an enough by the citation they were not It is clear Corp., Bosgosian Ry. v. Gulf Oil Northern Pac. antitrust suit. (1958),1 1, 5, 2 L.Ed.2d (E.D.Pa.1975). 1050 n.7 U.S. F.Supp. conclusively presumed to be unreasonable allege are defendants have not

6. Plaintiffs inquiry illegal price the termina- elaborate to reflect and therefore reduced the of beer they precise the measure of have caused or the tion of free As a harm credit. as to the argued, injury, damages plaintiffs’ principle it is for This of for their use. business excuse financing equal only of should be to the cost makes the not se unreasonableness methods for by proscribed beer inventories. Three different type of are restraints which sug- damages determining were the amount of the benefit of Act more certain to Sherman opportuni- gested by plaintiffs: (1) measure concerned, everyone the ne- but it also avoids ty any capital plaintiffs invest- that cost of new incredibly pro- cessity complicated and an for business; opportunity (2) ed in the measure investigation longed entire into the economic borrowing finance the cost of outside funds to involved, history well as of the inventories; or, (3) measure the reduction industries, at effort to determine in an related plaintiffs’ occasioned the value of business particular large restraint has been whether financing inventories out of cash on the hand, wholly fruit- so often unreasonable —an reducing liquidity thereby of the busi- Among practices less undertaken. when sanctioning any specifically ness. While not deemed to be have heretofore the courts which methods, measuring difficulty these fixing, price [is] in and of themselves unlawful plain- damages preclude should not amount Co., Socony-Vacuum Oil v. United States establishing that was suffered. tiffs from 150, 210, 84 L.Ed. 60 S.Ct. practices agreements are certain 1.“[T]here pernicious effect on at 518. which of their 78 S.Ct. because 356 U.S. redeeming any virtue and lack price product desirability, intend and on majority change competi- does not that in antitrust tion in extending the established rule of law cases between wholesalers cred- it greater importance is a violation. takes on as a See method Socony-Vacuum which can effectively also States v. Oil wholesalers lower price compete 310 U.S. 84 L.Ed. of beer in order to for the (1940). Although recognizing business of The majority retailers. ac- accomplished directly knowledges “competition price may be that where with indirectly, respect finds that majority price primarily the al- on credit center[s] leged agreement terms to fix does ... cred- price it price or indirect terms fixing.” amount to either direct would amount This fixing. among I was a disagree. naked com- petitors restraint to fix credit —a which creates purchase goods obliga- serves no other economic than to pay compo- tion to Credit is one them. affect no prices. other It affects functional paid nent of price product. the overall element in a sale of beer a distributor to purchasing goods The cost to a retailer of a retailer. I would therefore hold that the (1) consists of he has pay the amount alleged agreement illegal per is se. Nearly (2) goods, obtain the and the date on which 40 years ago Supreme Court stated: he has to payment. make that If there is a “Any which tampers combination purchase differential between a for cash price engaged structures is in an unlaw- time, and one on that difference is not activity. ful though Even the members interest part price. but Hogg See of the price-fixing group posi- were in no Ruffner, Black) 115, (1 118-19, 66 U.S. market, tion to control the to the extent (1861). Allowing L.Ed. 38 a retailer inter- raised, lowered, or stabilized est-free purchases short-term credit on beer prices they directly interfering would be effectively beer, reduces the when with the play free of market forces. The compared to a requirement the retailer places beyond Act schemes all such pay cash; same immediately amount pale part vital protects that of our and, conversely, the elimination of free degree economy interfer- credit is the equivalent increase.2 Congress ence. not left with us has To declare in the instant case that credit particu- or not determination of whether “a ‘non-price’ sale,” condition of as the lar are wise or un- price-fixing schemes generalized too asserts wise, healthy or destructive. entirely true, disintegrates when *7 exposed to the economic realities of the “Under the Act a Sherman combination industry beer in competi- California. Price purpose formed for the and with the ef- tion in the beer in California is raising, fixing, fect of depressing, peg- partially through restricted state law ging, price the stabilizing or of a com- system of mandatory territorial restrictions modity foreign in interstate commerce price and posting. See Cal.Bus. & Prof. illegal is per se.” Code 25000 et While seq. §§ containers Socony-Vacuum Co., United States Oil vary material, in vary taste, and contents in 223, 221, 843, 60 supra, S.Ct. at 310 U.S. at calories, color, and beer sometimes of one brand is substantially the same as that another. It is buy common retailers to The suggestion opinion in the carry and in resale stock for different applied with- se rule cannot brands from several distributors concur- proof agree- out purpose that the rently. Given the limits to support on ment was to finds no affect argue portion they savings 2. The defendants here do that the the realized from elimi- purchase price pro- nating decreased in of their beer free short-term credit. 1104 illegal- is to establish its study orate needed purpose the What the

in the cases. was, they thought ity. Society of Professional and what National defendants See States, credit, cutting off 435 U.S. Engineers about the wisdom has Supreme 692, Court recent- irrelevant. 98 S.Ct. 1355.3 ly emphasized: ruling plain- that Paradoxically, the our construing “In applying and Sher- would an- alleged damages constitute tiffs’ contracts, conspir- man Act’s ban flowing from withdrawal titrust acies, óf restraint and combinations proving rule for of credit under the liberal trade, that certain the Court held has weight forego- to the gives added damages so agreements practices ‘plainly are plaintiffs that have ing analysis. hold Society Pro- anticompetitive,’ National showing of some dam- adequate made “an States, Engineers v. United 435 fessional agreement” to termi- age flowing from the 1355, 679, 692, 1365, S.Ct. damage How measure nate credit. TV, (1978); Inc. L.Ed.2d 637 Continental unresolved; however, it is clear that left 36, 50, Inc., Sylvania, v. GTE 433 U.S. in- damage claim is derived from the 2558, 2549, (1977), L.Ed.2d due to purchasing in the cost of beer crease ‘lack . . redeem- so often of free short-term credit. elimination ing virtue,’ R. Co. v. Unit- Northern Pac. purchasing cost of say To overall ed 356 U.S. elimination increased a result (1958), con- L.Ed.2d 545 are saying same as functionally of credit is illegal fur- clusively presumed of beer rose the effective ther the rule of reason examination under alleged agree- plaintiffs. these Since Act generally applied in cases.” Sherman raised the effective ment to fix credit terms Inc., CBS, Music, 441 U.S. Inc. v. Broadcast beer, alleged price of 1556, 60 L.Ed.2d 1, 7, 8, 99 S.Ct. such, As price fixing. amounts added). Even (1979) (emphasis in the case, govern this illegality rule should under liability context of criminal the Sher ruling to the con- district court’s Act, has Supreme rejected man Court be reversed. trary should requires the claim that a criminal conviction finding produce anticom petitive effects. See United States v. Unit Gypsum

ed States 438 U.S. 854;

n.21, L.Ed.2d Group, Inc.,

States v. Continental Cir., (3d 1979);

F.2d 444 Antitrust & E-1,

Trade Reg.Rep. (BNA), No.

E-9. agreement among the defend

ant competitors instant case fits

comfortably within the classic mode of

fixing, anticompetitive and it is so plainly

its necessary nature and effect no elab- *8 party by market is a to this case. 3. Lest to a beer distributors’ we be led conclusion false Furthermore, ambiguous concepts, necessary who use of it is distributor how another point agreement add to out could statement would abide price competition to understand “an to eliminate credit could is difficult sharpen competition respect “cripple free- [his] would since ability removing perceived by thereby barrier some sellers restrain . and [his] dom . entry,” curiously inappropriate judgment." own market [his] sell in accordance with quite unpersuaded Joseph Seagram this this I am case. E. Co. v. Kiefer-Stewart assertion, strange Sons, Inc., I subscribe to the nor do suggestion justify it would L.Ed. seeking prices. person entry No to the