O. Hommel Company v. Ferro Corporation

employing from defendant order this Baranyai should be defendants the other enjoined Baranyai is from encourag- abetting, aiding, from restrained serving police as a officer or law enforce- participating ratifying or or ing conduct his any Borough ment in the official basis in the forth same, set for reasons except policeman of Millvale as a desk [sic], opinin accompanying entirely whose activities shall be confined that: ORDERED THEREFORE IT IS police Borough to the station of of hereby injunction (1) permanent A enjoined Millvale and he is further from L. Frank defendant against the issued possessing using upon prisoners or or oth- acting in concert persons Baranyai and all kind, persons any weapons any par- er of (a) stopping, him from enjoining him with ticularly limiting generality without or oth- plaintiffs imprisoning arresting or blackjack, foregoing any nightst- adequate probable without er individuals ick, kind, any firearm of brass knuckles abusing or otherwise cause, (b) physically weapon, so that any or other offensive individuals, (c) plaintiffs or other treating his activities with the Millvale Police force while excessive wrongful or using entirely Force shall be confined to desk in other- arrests or lawful bringing about duty duty and in the course of such he after arrested handling individuals wise permitted any weap- shall not be to use custody. secured they have been any upon prisoners ons of kind or other Baranyai together (2) The defendant persons. Porter, D. James defendants with the (6) jurisdiction The court will retain of McCarthy, Regis J. Police and Chief this purpose issuing case for the fur- Millvale, Alle- Borough of Mayor of require- ther orders to insure that restrained County enjoined are gheny ments of this order be carried out. intimidating threatening, harassing, from (7) plaintiff’s If counsel have claim or plaintiffs retaliating against the or attorney’s expenses they fees and First in violation of their other individuals present properly shall the same itemized rights and Fourteenth Amendment and verified to this days court within 20 and the speech[,] assembly and association following date of this order laws and protection of the right equal will, necessary, which the court if hold right travel for their constitutional hearings respect further to the against the conduct lawfully complaining same. testifying at Baranyai or of defendant hearings involving his conduct. trials or re- Baranyai (3) defendant seizing stopping, from

strained individuals

searching plaintiffs or other Borough whether in on the streets COMPANY, Appellee, O. HOMMEL elsewhere, homes or in their Millvale adequate in vio- cause without otherwise First and Fourteenth of their lation CORPORATION, Appellant. FERRO to freedom rights and Amendment [sic] 80-2062, 80-2723. Nos. seizures searches and unreasonable from rights not to be of their and in violation Appeals, Court United States process due property without deprived of Third Circuit. law. Argued May 1981. (4) enjoined All of the defendants are Sept. Decided engaging from further in conduct as en- Rehearing En Banc Rehearing and joined encouraging, from above or af- Sept. Denied firming, participating in violations of injunction by Baranyai. hereby All of the defendants are enjoined days the date of effective 5

George (argued), Squire, I. Meisel Sand- Cleveland, Ohio, Dempsey, appel- ers & electrolytes clay, and other substances Morgan, Lewis lant; Kirkpatrick, W. Miles C., porcelain enamel necessary Bockius, Washington, D. Arthur J. & coating buyer’s proper- desired Smith, McClay, Schwab, Reed, & Shaw Pa., ties. The frits and additions additives Pittsburgh, of counsel. pre- by the customer on a are assembled (argued), Martha Z. Buerger David B. formula in what is called a determined Rodewald, Buchanan, Zatezalo, Ingersoll, ground which is milled or with “batch” Corp., Pitts- Buerger, Professional Kyle & porcelain enamel water Pa., appellee. for burgh, slip applied to the steel “slip”. The is GIBBONS, HUNTER and appliance part by spraying, dipping or Before GARTH, Judges. and fused coating. Circuit flow It is then dried produces porcelain en-

by heat which the OF THE COURT OPINION amel finish.

GARTH, Judge. Circuit App. I at 55-56. brought Company suit Hommel The O. companies manufacture ceramic The also claiming Corporation, against Ferro the ingredient in the which is the basic frit 2 of the had violated Sherman § that Ferro glaze coating products such as dishes. on Act, and 2 of the § 2§ 15 U.S.C. jury’s on dis verdict Robinson-Patman by the Robinson- Act as amended crimination, however, only was based on Act, Be- § Patman U.S.C. porcelain frit.1 There is sales of the enamel porcelain Ferro sold and tween 1973 major in the method of manu no difference at a to three customers enamel frit (II App. facturing types of frit at the two charged other cus- the it lower than 413), speaking” the Ferro “generally and tomers, its total cost. and below the production Hommel methods were and a direct- court refused to enter The district (II 416). App. same. at Ferro, the found for and ed verdict plant Carnegie, Penn- Hommel has one in the Robinson-Pat- that Ferro had violated (both porcelain enamel and sylvania. Frit the but not Sher- man U.S.C. ceramic) principal product, constitut- is its subsequent motion for man Act. ing of sales. Its net worth 53% to 68% notwithstanding judgment the verdict on million, sales dur- about and its annual $2.5 was denied. Robinson-Patman count the period generally were ing the 1973 to was insufficient evi- hold that there We $7,000,000. range Hommel’s in- predicate upon which to Robinson- dence $12,902 in come before taxes increased we reverse and liability, and thus Patman $256,615 (IV App. at 212- 1973 to in 1977. entered for Ferro. direct porce- gross profits Its on the sale of $475,- approximately frit were lain enamel I. $540,000 1977, although and in general and selling, laboratory, when and A. allocated, expenses were administrative Hommel Corporation and 0. Both Ferro (IV year. App. at showed net losses each and sell (Hommel) manufacture Corporation loss, however, 217-21). these frit Its net on frit is enamel two kinds of frit. Porcelain $259,- $19,000 compared was in 1977 sales coating of such ingredient the basic 000 in 1973. Id. stoves, bathtubs, washing ma- products as corporation These frits: refrigerators. chines and is a multinational Ferro is about several divisions. Its net worth plaintiff defendant and are sold $150,000,000 peri- during applicable times, frits and conjunction, with other at $334,000,000. averaged od its sales or “additives” always with “additions” frit, appeal porcelain frit, porcelain enamel Although types center on enamel both ceramic, parties, produced frit involved in Ferro’s discrimina- are subject litigation, Hommel brief at the issues tions. are frit in United during period, manufactures States at sales that same and a 7% Nashville, Angeles, plants Los and Cleve- market share Only in both 1973 and 1977. alleged illegal . The sales all part land. concerned of the decline in sales can be attributed plants. manufacture latter frit at the two to the porcelain recession. enamel facing frit increasing competi- are five There manufacturer-sellers products. tion from plastic other Paint and porcelain largest enamel frit. Ferro is the products being were porce- substituted for one producer Hommel is of the two lain enamel frit. An increase in the im- Perneo, Chicago smallest. Vitreous and ports products applied, frit largest next two manufacturers after Fer- also hurt demand domestic frit. ro, are both divisions multinational con- glomerates larger celain alleged 1973-77 were ^{[1977] [1974] [1973] [1975] [1976]} enamel frit violations follows: period, Industry 180,188 111,484 134,397 125,936 144,243 occurred, than Ferro. (in years thousands of during 54,200 46,507 51,067 76,365 61,995 Ferro the sales of During which the pounds) Vitreous Chicago 31,921 30,915 27,804 32,905 41,064 por- Joint Exhibits porcelain 393). All five had a lished put all 1973 to 1977 Prices type lists, lists. confidential, “special their for frit enamel frit. but neither Hommel nor Ferro period. price quotations (II porcelain 10-13). of the firms had App. generally (See, at (IV Prices varied with enamel 341). e. rose during the App. price list” for g., on their IV Ferro also frit published at App. 15-22, sold. pub- frit: four concerns that ures, during App. at These el market shares for sales of ^{[1977] [1976] [1974] [1976] [1974] [1975] [1975] [1973] [1973]} As These frit can figures ^{[43] [41] [40] [42]} 42% Ferro 617). figures be seen from the their own the 1973 to 1975 Vitreous Chicago ^{[25] [25] [23]} 23% do not include Pomco 32,662 30,907 38,086 31,628 24,816 resulted in the following production Perneo ^{[25] [22] [22]} 21% Hommel 12,247 porcelain 9,162 7,615 9,278 6,480 Hommel porcelain production ^{[6] [6] [6]} 7% period production by needs. Richardson Richardson Ingraham- Ingraham- the frit enamel enam- 12,426 ^{[4] [6]} 7% ^[5] 5,877 6,452 5,432 8,437 fig- (Ill 1. constituted no more than and 2% of the national 488),2 but above frit this 1973-1977 sales to three customers: General House Ferro’s average below manufacturing cost).3 Housewares, wares, Briggs, and General Electric. Porce lain enamel frit was sold to these customers The Robinson-Patman General companies (which IV discriminatory App. porcelain published Ferro Housewares at Briggs and General Electric during domestic sales made period, total cost 392d-394). approximates Ferro’s enamel frit sales B. liability sales made to General list (Joint (Ferro (III average period. 5% was based on Exhibits App. brief at as its direct and below variable Id. at 484- Ferro’s during all 7), steep went into a decline from General Housewares pots manufactures only partially pans. which it recovered. 1977 and In 1966 Ferro convinced General porcelain production enamel frit being was less Housewares to discontinue a self- production. than 75% of the 1973 smelter frit. Between 1973 and 1977 during loss suffered 29% of sales five Ferro’s frit sales to General Housewares period, 40%, 5,660,000 year and its market share fell declined pounds about from 3,650,000 pounds. marketing to 40%. Hommel had a 25% decline in As 42% 11, infra, See note 3. requisite definitions, share of Ferro’s Divi- tor “cost” Coatings overhead sion costs was allocated to determine total cost. annually pur- 362-364). Electric General order to sell to explained, manager 15,000,000 pounds of self-smelter, approximately chased as General was a firm that 4,500,000 pounds from very been, had to be frit and had obtained had Housewares manufacturing Al- Electric or- costs. Ferro in 1975. General to direct close 3,800,000pounds discontin- of frit in 1976.. Fer- had dered though Housewares General frit, sought reestab- the 1976 unsuccessfully it could rescind production ro ued its operation for less than the discount for smelting and discontinued lish its discount 618). $500,000. (Ill General App. at no frit to General sales. Hommel sold high very resistant was also 1977. Between Housewares Electric in 1976 and pot pan the domestic Electric frit because Hommel’s sales General and 1975 foreign compe- 200,000 pounds year. “tremendous business faced averaged had about Ameri- (Ill App. Several large tition.” sales was due Hommel’s loss of including at companies can change coating part, totally, to a if not field — gone customer —had least former Ferro one Electric di- made two General materials had never sold Hommel out of business. testify employee did visions. A Hommel Housewares. any frit to General attempted to sell frits to General that he be- General Electric refused Electric but Briggs arrangement its Ferro. cause of manufacturer, had Briggs, a bathtub many years. customer for been a Ferro C. plant made 1974, Briggs its moved charged attempting Ferro with Hommel supplier Hommel frit because Hommel its industry monopolize the frit in violation lower, to cost-saving applied at a frit could be Act, 2 15 U.S.C. § of 2 of Sherman developed § Quality problems temperature. (1976), in vio and with discrimination began Briggs plant enamel the new at —the 2(a) the Robinson-Patman lation of president § The off the steel. to flake 13(a) (1976). June On searching a solu- 15 U.S.C. Briggs § that in for testified denied Ferro’s mo purchase 1979 the district court problem, he decided tion to this Ferro, judgment, accepting although summary he did not for again from tion frit groundcoat argument from sales below total purchasing the Hommel’s discontinue sup- permit thereafter could an supplier. Ferro cost in some circumstances the same requirements. plied Briggs’s frit intent. O. Hommel half of inference of Briggs (W.D.Pa. was identical Corp., F.Supp. sold to 793 The frit v. Ferro 472 by Ferro to other customers Pie v. other frit sold The relied on Utah court higher Co., label and at a Baking under a different U.S. Continental price. (1967) arriving was later determined It 18 L.Ed.2d 406 S.Ct. faulty, and Briggs tubs was Corp. steel in the Citing Zenith Radio at its decision. purchase resuming the Briggs F.Supp. considered Matsushita Electric Indus. Briggs mem., (3d Hommel. demanded (E.D.Pa.), frit from aff’d 521 F.2d price competitive with 1975), Hommel a that Hommel could it also ruled four, protection six or more price, price demonstrating for introduce evidence not months, “something special” mentioned low frit Ferro had subsidized Briggs by turned out given to Ferro —which through foreign sales. United States price protection, assured yearly to be upon the district court theory The Hommel year-to-year basis. Ferro on charge explained in its to the proceeded was any price protection and did never offered jury: Briggs after 1974. sell to below cost at a Where one seller sells Electric General plus alloca- an price less than direct overhead, competing seller for and a a 5% dis- tion April, 1976 Ferro extended injured, effect if who is undercut on certain frits count Electric to General 6,000,000 be found upon buy would Electric General to such discrimination. during (IV App. at traceable pounds of frit course, (it should, of in this connec- verdict had moved for a You directed verdict giv- the instructions I have evidence,. tion consider App. at the close of all the Ill declining you previously as to a indus- en 802), and a motion to alter the so try. damages. as to strike all Ferro also filed a 920-21). judge’s previous (Ill App. at The protective appeal notice supple- instructions, given on the 2 Sherman Act § mentary judgment order. count, were: This court remanded the case for deter- that, Now, charge you I where there is motions, pending jurisdic- mination of all competition among members of a rela- appeal being tion of retained. The dis- tively industry, particularly stable where trict post court found the trial motions un- one of the members manufactures timely and in the alternative denied them case, frit, product question, in this on the merits. It held that intent glaze, each manufacturer porcelain could be found in Ferro’s discrimina- which, charge prices period should over tion and in pricing. Ferro’s below total cost of, say, years, four as in this should cost; present and, appeal resulted. equal the total if a less than the total cost has been effected or manufacturer, then,

charged by the such II. pricing may predatory pricing; amount to In this case we are concerned with is, injure pricing intended to a com- course, petitor. primary to continue to discrimination at the Of seller level. period total cost in this of time less than Supreme Court wrote in FTC v. Anheu- competi- could force one or more of the ser-Busch, Inc., 536, 546, S.Ct. bankruptcy. tors in the frit into 1267, 1272, that “an you your You must make all costs or are independent important goal 2(a) § go going to broke. protection competitors to extend discriminating seller.” However, you were to find that part, In relevant declining during market frit was Act, as amended the Robinson-Patman 1977, years and that the frit in- 1973 Act, 13(a), 15 U.S.C. reads: declining dustry industry, was a (a) It any person shall be unlawful for large there was a amount of unused ca- commerce, engaged in in the course of then, pacity, prices charged by the manu- commerce, directly only equal need the such either or indi- facturers costs; is, variable the direct manu- rectly, price to discriminate in between facturing costs. purchasers different of commodities of grade quality, 912-913).4 like where either or (Ill App. at any purchases involved in such Ferro liable under the found commerce, are in discrimination where Act, Robinson-Patman but not under the use, such commodities are sold con- Act. The calculated the Sherman $1,500,000, damages sumption, to be which the district or resale within the United $4,500,000.5 court trebled to any Territory or thereof States or the any pos- District of Columbia or insular court, 16, 1980, the district in a On June place jurisdic- session or other under the order, awarded supplementary States, tion of the and where the United $483,350.48 attorney’s fees to in costs and may of be effect such discrimination sub- days Hommel. Within ten Ferro filed a stantially judgment notwithstanding the to lessen or tend to motion for a 4, appeal February disposition Ferro filed we have no occa- a notice of 4. Because of our such, appeal That in 1980 from the verdict. sion to address the opinion. being App. premature. I dismissed as See at 346 Busch, 542-43, 553, monopoly any in line of com at at

create a U.S. S.Ct. 1270-1271, 1276; Kalinowski, merce . .. .6 4 Van. Anti 28.08, Regulation trust Laws and Trade §§ added). (emphasis (1980); Pie v. Utah Co. Continen 29-01[4] to in price discrimination referred Sec- 685, 1326, Baking tal U.S. An- 2(a) merely a difference. tion (1967); Dean Milk v. Co. heuser-Busch, at 363 U.S. at S.Ct. 1968).7 FTC, (7th 395 F.2d prices charged by in 1274. A difference customers, for the same seller to different defining scope liability the of under product, constitutes discrimination. larger goals the Robinson-Patman the of antitrust law must be considered. The illegal is not Price discrimination Supreme has us “that the Court cautioned level, per primary plaintiff se. At the Act should be construed Robinson-Patman of such discrimi must show that the “effect consistently policies with broader of the an- may substantially be to lessen com nation titrust Pacific Tea monopoly any laws.” Great Atlantic & petition or tend to create a FTC, n.13, . Anheuser- . ..” See line of commerce Co. S.Ct. (b) entirety pro- 6. Sections in their read: tions and not in restraint of trade: And further, nothing vided That herein contained (a) any person en- It shall be unlawful for prevent price changes commerce, shall from time to time gaged of such the course response changing commerce, where in directly indirectly, conditions af- or either fecting marketability pur- the market for or the discriminate in between different concerned, goods grade such as but not limited of commodities of like chasers perish- quality, any purchases to actual or imminent deterioration of where either or goods, goods, able obsolescence of seasonal in such are in com- involved merce, discrimination process, are sold for distress sales under court good or sales in where such commodities use, consumption, faith in or within the United discontinuance of business in resale any Territory goods or thereof or the District concerned. States any possession rebutting prima-facie or or Columbia insular Burden of place jurisdiction of the Unit- other under case of discrimination States, (b) made, Upon proof being any hearing dis- ed and where effect such substantially section, complaint crimination competition to lessen on a under this that there monopoly or tend to create a has been discrimination in or services commerce, injure, destroy, furnished, rebutting line of or to or facilities the burden of any person prevent competition prima-facie or who showing case thus made knowingly grants justification either receives the bene- upon person charged shall be discrimination, section, fit of such or with customers with a violation of this and unless Provided, nothing shown, either of them: That affirmatively justification shall be prevent herein contained shall differentials Commission is authorized to issue an order Provided, which make due allowance for differ- terminating the discrimination: manufacture, sale, however, ences in the cost of delivery resulting nothing That herein contained shall differing methods prevent rebutting prima-facie a seller quantities are in which such commodities by showing case thus made price that his lower purchasers to such sold or delivered: Provid- furnishing or the of services or facilities ed, however, That the Federal Trade Com- any purchaser purchasers to good was made in may, investigation mission hearing after and due equally price faith to meet an low of a parties, fix and es- to all interested competitor, or the services or facilities fur- limits, quantity tablish and revise the same competitor. a nished necessary, particular as it finds as to com- commodities, 2(b), supra, where it 7. Section see note 5 does state that modities or classes of shown, purchasers greater price in once discrimination been finds that available quantities has rebutting prima burden of facie case lies are so few as to render differen- unjustly “price discrimina- with the defendant. Yet the term dis- tials on account thereof tory any promotive monopoly in line of crimination” in synonymous should not be considered § commerce; foregoing “price shall then not with the term discrimina- and the 2(b). permit based on tion” in Otherwise a mere differ- § be construed to differentials case, prima quantities greater a a in than those ential would establish facie differences provided clearly so fixed and established: And fur- result at odds the construction Anheuser-Busch, Inc., ther, 2(a). nothing pre- 363 § That herein contained shall See FTC v. 536, wares, 542-43, 1267, 1270-1271, persons engaged selling goods, 80 4 in U.S. S.Ct. vent (1960) selecting (competitive in commerce from L.Ed.2d 1385 harm is an or merchandise statutory violation). in fide transac- element of a their own customers bona

347 938, (1979). 925, A court There was thus no evidence of trend to wary imposing liability monopolization must be in was there evidence of —nor “price uniformity rigidi competitive would result a less industrial structure. 933; 80, ty.” Id. at 99 Automatic structure, S.Ct. collapsing price There was no FTC, 61, 63, Co. v. 346 U.S. 73 Canteen competitive condition found to constitute 1017, 1019, (1953). L.Ed. 1454 S.Ct. 97 Se Baking harm in Utah Pie v. Continental may cret discrimination be the Co., 685, 1326, 386 U.S. 87 18 S.Ct. L.Ed.2d pub effective means for a firm to undercut (1967). speculative possibility oligopolistic prices. ABA Anti lished See Hommel have increased its sales had Section, 4, Monograph trust No. The Robin discrimination, engaged Ferro not Law, Policy son-Patman Act: Vol. I competition cannot constitute harm to with- (1980) at 29. The Robinson-Patman Act is meaning 2(a). Even the most a means to maintain to be used as generous reading of the full record fails to artificially high prices. defining any competitive disclose harm which Hom- scope liability, of Robinson-Patman it must (its remaining mel suffered market share vigorous price competi be remembered that stable, gross profits and its income and goal tion a central of the antitrust laws. porcelain having the sale of enamel frit Industries, International Air Inc. v. See 1977), increased between 1973 and much (5th American Excelsior 517 F.2d 714 competition.” less “detrimental effects on denied, 943, 1975) cert. S.Ct. 1411, “A focus on L.Ed.2d B. competition, detrimental effects on rather competitors, than a concern with individual competitive there is no actual Since of the is fundamental to a reconciliation that has been harm demonstrated Robinson-Patman Act with overall antitrust analysis our must focus on whether Rowe, DISCRIMINA PRICE F. policies.” predatory there was evidence of Ferro’s ROBINSON-PAT- THE UNDER TION competitive intent from which harm can be added). (1962)(emphasis MAN ACT Predatory inferred. can be shown intent evidence; (a) by express two means: means of meet There are two basic (b) by pricing. inference from “below-cost” ing competitive injury requirement: (1) proving predatory This second means of competitive injury actual shown market intent is known as the “double-inference” analysis; intent pricing, predatory “From test. below-cost competitive injury may be inferred. inferred; finding pre intent is dation, injury competition is A. inferred.” Engineering Pacific & Prod. Co. v. Kerr- disputed It is not in this case that Ferro (10th Cir.), Corp., 551 McGee F.2d porcelain sold enamel frit to three custom- denied, cert. 434 U.S. ers below the at which it sold that L.Ed.2d 472 central issue is frit to other customers. The whether these differentials substan- Initially, we must define in tially lessened or tended to cre- legislative history tent. The monopoly. ate a Act indicates that intent is an destroy intent a rival with the ultimate competitive clearly There was no actual purpose acquiring monopoly partic damage in this case. The market share of 627, locality. H.R.Rep.No. dropped, ular See 63d Ferro while Hommel retained its 698, (1914); S.Rep.No. market share. The market shares of Chica- Cong., 8 63d 2d Sess. Perneo, (1914).8 go-Vitreous Cong., and both increased. 2d Sess. 2-4 ondary competition. primary Clayton 8. 2 Act was of line For a line Section of the course here, involving presented by case the issues to us later amended the Robinson-Patman Act in amendments, history legislative the relevant is that of the 1936. The Robinson-Patman however, Clayton principally Act. were concerned with sec- 348 relevant, predatory express pred- in To be evidence of of

More recent definitions sacrificing present atory alleged revenues tent focus on intent should demonstrate the achieving monopoly of purpose with the predator’s sacrificing present intention of The Ninth Circuit profits in the future. hope obtaining monop- revenues with the of pricing pricing predatory has defined oly profits. evidence Hommel’s direct of defendant was “fore indicates that a secrecy predatory intent stressed the of going present profits in to create a order Briggs, Ferro to sales made General position in which it could market Housewares, Electric. The and General profits enough supranormal and to obtain prices of the frit that Ferro sold to these Hanson v. recoup present its losses.” Shell published. were Hommel em- concerns 1352, Co., (9th 1976), F.2d 1358 Cir. Oil 541 placed in phasizes that identical frit was 813, denied, 1074, 97 50 cert. 429 U.S. S.Ct. bags numbered and sold at differ- different Bros., (1977). Janich L.Ed.2d 792 See also prices secrecy ent to other customers. This Co., Distilling Inc. v. American 570 F.2d asserts, deception, possible Hommel denied, 848, (9th 1977), cert. 439 856 Cir. predatory evidence of intent. 829, 103, L.Ed.2d 122 U.S. 58 here, however, secrecy cannot be Turner, (1978); Predatory Pric Areeda and predation. Keeping viewed as evidence of ing Belated Practices Under Section sales these three cus the “below-cost” Act, 697, 88 Harv.L.Rev. of the Sherman tomers secret does not indicate that Ferro (1975). concept predation under intended to drive Hommel out of business the Robinson-Patman Act does not differ hope obtaining monopoly prof with the concept predat Act Sherman secret, By keeping prices per its. its Turner, generally ion.9 See Areeda selling mitted Hommel to continue to Hom Harv.L.Rev. at 727. higher mel’s own customers at Hommel’s there was suffi Hommel claims that prices. If Ferro had made known its lower upon intent cient evidence of prices, then Hommel and the other frit liability. points It which a could base manufacturers would have had to meet what it to be direct evidence of considers prices losing those risk customers.10 predatory intent and asserts that the double likely conduct Ferro would be more Such correctly employed inference test was injure competition than did the here —from the below total (See discrimination here. infra for a discus could infer intent. isolated, sion across-the-board versus however, conclude, that there is no ex We non-geographic price discrimination). press evidence of intent and that Moreover, test, here any discriminations the use of double inference on accomplished secrecy. improper. of this could not be without facts claim, 2(a) jury’s findings from a Robinson-Patman since 2 § § It could be maintained that liability requires dangerous prob- or the Robinson-Patman claim was of the Sherman Act ability liability finding with its of no on specific inconsistent the of success and a intent to con- Bros., Act claim. In Janich § Sherman prices destroy competition. gener- trol See 848, Distilling 570 F.2d Inc. American Section, ally Monograph ABA Antitrust No. denied, (9th 1977), cert. Law, Policy and The Robinson-Patman Act: (1978), the court S.Ct. plaintiffs Vol. I Since do not contend threatening stated that for primary differentials inconsistent, appeal that the verdicts were competition, line § and since our resolution of this case does not Act, Act as amended the Robinson-Patman issue, require us to meet this we do not resolve § has the same substantive content as liability whether Sherman Act is identical to 15 U.S.C. 2 The court § Sherman liability Robinson-Patman differentials consequently held that error of the district threatening primary competition. line directing the defendant on court in a verdict for harmless, be 2 Sherman Act claim was § course, public, 10. Of if Ferro made its for the defendant on cause the had found have there is a likelihood that Ferro would been the Robinson-Patman claims. See also Areeda obliged to offer the lower to its other Turner, view 88 Harv.L.Rev. at This customers. suggested It has been that a is not unanimous. monopolization 2 Sherman Act claim differs

349 setting prices vealing intent admits, to offer a it is difficult As Hommel 1973-1977, regard testimony as but we that price to some favored a lower product at relationship predatory bearing no to intent. offering the same lower without customers customers, persuaded are we that of the other risking the loss Nor to other Hommel, presented by constituted business, cus- evidence when the less-favored of their Additionally, proof predatory of intent. learn of the discounts. tomers earlier, pricing discount secret as mentioned express Having that no evi determined to under- only effective means may be the by revealed dence of intent is thus fail to oligopolistic price. We cut an record, argu Hommel’s we turn next secrecy why price is indicative understand by aver pricing that Ferro below its ment intent, Hommel called nor has age exhibited the in cost11 has ex- any cases that would our attention to Hommel, 2(a) proscribes. rely tent which § relationship. plain that Baking Pie ing on Utah Co. Continental Co., 685, 1326, signifi- 18 L.Ed.2d highly it 386 U.S. also considers Hommel Williamson, Predatory Pric expert wit- 406 and economic that an outside cant Strategic Analysis, 87 ing: A and Welfare because of the Ferro testified that ness for 284, (1977), L.J. 321-22 asserts the frit indus- Yale continuing capacity in excess below-average pricing cost in this halt might be forced to try, frit firm some case, competitive harm can be inferred. expert was in the future. The production counters, since there is no actual in- Ferro if demand did not opinion inferred, damage, can be competitive none crease, efficient use of would be the most it alternative, competitive and in one of the firms resources for economic only can be inferred from be only do we find harm business. Not leave the frit marginal average variable testimony by a low cost accept difficult it 1979, agree We with Ferro that on the as re- cost.12 employee at trial non-Ferro Marginal pricing also maximizes “Average at 711. cost of fixed cost and cost is the sum idling output.” by avoiding Areeda welfare the “wasteful total variable cost divided social Turner, Predatory Pricing productive and Related and Areeda and of current resources.” Turner, Predatory the Sherman Pricing, Under Section Practices Williamson on 697, (1975). Fixed costs 1337, Harv.L.Rev. L.J. See also North- Yale vary changes in do not are those which output, Telephone Telephone v. American eastern Co. costs which do and variable costs are (2d Telegraph 651 F.2d at 87-88 and output. vary changes Id. Variable with typically 1981); Chillicothe Sand & Gravel Co. v. Cir. materials, include such items costs Corp., (7th Marietta 615 F.2d Martin fuel, product, directly used to labor perfect Where there is maintenance, Average repair variable etc. and continuing profits by produc- a firm maximizes variable costs divided cost is the sum of all output marginal equals the market tion until cost average than is definition lower Turner, price. 88 Harv.L.Rev. at Areeda and cost. however, monopolist, an increase in 702. For a thus, output will reduce the market Marginal increment to total cost cost is the [marginal] to the mo- producing incremental revenue additional in- “the nopolist from an that results solely output. selling is the It is a function an additional unit crement of costs, by costs, unit, defini- since fixed minus the variable tion, received for that lower by changes in out- selling are costs unaffected all other units at the revenue lost for usually Marginal put. over decreases monopolist price.” max- Id. at 703. A lower produc- output increases as low levels marginal equals profit when revenue imizes plant capacity. approaches tion marginal cost. Id. at n.19. Id. average variable cost Areeda and Turner use conclude that Areeda and Turner marginal aver- cost because as a substitute margin- reasonably anticipated short-run above age ascertain. When variable cost is easier to 733; non-predatory. Id. at III P. is al cost constant, equal average it is variable cost is Law, Turner, Id at Antitrust Areeda & D. cost, average marginal cost is when variable deem Areeda and Turner cost, marginal declining, greater than is non-predatory marginal be- cost to be above increasing, average it is variable cost when produces point monopolist to a cause “[i]f marginal 718. Aree- cost. Id. at less than the marginal price equals less where presume that Turner would have a court da and larger per unit will suffer losses efficient firms ” variable cost at or above Turner, input.. . Areeda & 88 Harv.L.Rev. “Every prices elsewhere. higher the should not have nanced of this facts prac evil engages in this predatory intent concern that permitted to infer been necessity recoup its losses must of evidence of Ferro’s “below-cost” tice or sections communities particular in the pricing. sold below commodities are where their the The main evil at which § by raising profit a fair cost or without price geographic dis- Act was aimed was of commodi the same class price that nation- Congress feared crimination. value in fair market ties above their lower costs in one re- wide concerns would S.Rep. other sections or communities.” destroying gion local with the intent recoup Whatever 3.13 the merits of this acquire competitors thereby hoping to a theory, only applies ment clear that it is locality. S.Rep.No. monopoly in See geographic price setting. in a discrimination (1914); Cong., 2-4 H.R. 63d 2d Sess. theory presupposes geo The that there is a Cong., 2d Rep.No. 63d Sess. graphic commodity market where Report The House stated: engaging prac concern such “evil” expressly bill ... is 2 of the Section price competition. tices faces no correcting designed the view of and with implicit congressional belief forbidding widespread and un- a common non-geographic price discrimination does practice whereby great fair trade certain present the same threat of economic corporations and also certain smaller con- primary harm at level is shared monopoly to secure a cerns seek current commentators. Areeda Turner by aping trade and commerce the meth- prohibit price-cut- would not even selective great corporations, ods of the have here- ting: destroy endeavored to tofore unprofitable render the business of Price Discrimination in the Same wares, competitors by selling goods, their Geographic Market.— price in the and merchandise at a less If, contended, monopolist as we have a particular communities where their rivals permitted general should be to make a engaged are in business than at other long price equals reduction so as his places throughout country. ... marginal or exceeds we are unable past prac- it has common been most persuasive see prohibiting case for great powerful

tice of combinations price-cutting selective to retain or obtain engaged notably the Stan- commerce — price-cut particular customers. Selective Co., dard Oil and the American Tobacco ting possibly cannot be more harmful notoriety, and others of less but of competitors general price small than a great influence —to lower of their reduction to the same level.54 And since commodities, oftentimes below the cost of additional sale at a at or above production in certain communities marginal cost does not decrease shortrun they competition, sections where had returns, necessary pre net element of destroy unprofit- the intent to and make missing. dation competitors, of their able business purpose and with the ultimate in view of however, price-cutting might, Selective thereby acquiring monopoly par- likely general price-cuts, more than occur locality ticular or section in which the monopolist’s since losses on selective re- discriminating price made.... ductions would be smaller. expressed Turner, Id. The bill similar con Senate Areeda & 88 Harv.L.Rev. at 725- Kalinowski, Congress supra cerns. dis at § believed that also Van 26. See 29-94-95; Note, Injury locality 29.04, Competitive crimination one would be fi earlier, Turner, supra, lawful. P. Areeda and D. Law, Antitrust 13. As noted see note 8 the 1936 71Id at 154 Robinson-Patman amendments were almost en- tirely concerned with the effects of dis- secondary crimination at the level. Act, 74 Harv. products. Utah Pie sold its Under the Robinson-Patman 1597, 1610-11(1961). set pie national L.Rev. manufacturers prices were all below regions, their in other pred The theoretical evil that lies behind many and there was evidence that of the atory pricing large is that a firm will en prices were below “cost” —a term which the illegal price-cutting gage in the tactics Court, point, apparently at one defined as feared, Congress thereby forcing plus “less than . . . direct cost an allocation price, concerns also to cut their smaller Pie, for overhead.” Utah 386 U.S. at losing risk all their customers to the initial price pies, 87 S.Ct. at 1333. The of frozen price-cutter price cutter.14 If a offers a Pie, including those of Utah fell dramatical- price only to a few set number of lower ly. Utah Pie’s share of the local market fell firms, price then its schedule cannot attract sales, to 66.5% 45.3%. Utah Pie’s how- competitors. customers from its Those ever, nearly tripled and its net income in- competitors will be able to their retain cus creased. tomers, because their customers will not be price given by able to receive the discount evidence, Upon Court, Supreme the Thus, price-cutter. competitors the will reversing Appeals, the Court of reinstated not be forced to lower their to meet jury’s finding liability against price-cutter. type This discrim national manufacturers. The Court held ination would be difficult to maintain with competitive requirement that the harm had secrecy out because otherwise disfavored (1) been satisfied because: The “drastically price-cutter might customers of the demand declining price structure” constituted actual equal secrecy, explained treatment. This competitive harm. Id. at at S.Ct. earlier, helps competitors to retain their predatory There was evidence of meeting price-cut customers without intent which inju- bore “on the likelihood price. ter’s Unless a customer knows of the ry competition.” Id. at 87 S.Ct. at predatory price, buy lower and can at that (footnote omitted). predatory This in- price, price discrimination will likely not tent the defendants’ charging shown competition. have an adverse effect on market, lower City Lake Salt apparently, though it is not made ex- Moreover, an additional sale at plicit, by pricing average below cost. marginal above cost will increase short run net returns. A seller faced with a choice of Utah Pie thus does not stand for the making marginal a sale at above cost but proposition that in a case such as the sale, foregoing below total will one, present selective, non-geo- which is a profit choose to make the sale. Such a graphic price case, pricing discrimination maximizing sale cannot be indicative of average below cost is sufficient evidence predatory impelled intent. We are thus upon competitive which a infer can non-geographie conclude that in a selective competitive harm when no actual harm has discriminatory pricing case when actual Supreme been shown. The Court did not shown, competitive harm has not been Rob competitive indicate that require- harm primary liability inson-Patman line cannot merely by ment could be satisfied a show- imposed merely upon evidence of selec ing below-average pricing. only cost It below-average pricing. tive cost stated that “the predatory existence of in- entirely might injury

Utah Pie is consistent with our tent bear on the likelihood of Pie, analysis. competition,” (footnote omitted), In Utah national manufac- id. pies challenged turers of frozen dessert the context of a case where it also found (18 employees, family oper- competitive inferring of a small actual harm. When ated), manufacturer, pie pricing, local dessert intent Utah from “below-cost” Pie, by lowering prices locality emphasized where the Court also that the defend- predator capacity 14. The must have the Turner, meet the new demand. Areeda & Harv.L.Rev. at 718. Although City Lake market we have discussed various pies in the Salt

ants sold urged they elsewhere in the Unit- economic theories as have been at a lower than 690, 694, 698, 701, upon parties, us we need Id. at not choose ed States. Therefore, 1329, 1331, 1333, among even them to conclude that in this case theory support the insufficient evidence existed to warrant if Utah Pie would intent, competitive and hence submission of the Robinson-Patman claim harm, merely by jury. shown below-av- to the While we are inclined to ac could be cept erage pricing, theory premise would the basic such Areeda and Turner apply geographic in a discrimination thesis intent case. be inferred from sales at or above cost, light variable of the issue that we theory15 The Williamson cost relied must resolve here and the record which apparently by the district Hommel and it, presents we need not declare our adher court, not convince us that in a selec does theory any ence to that or other economic price predatory in tive discrimination proposed. The record here discloses that pric tent can be inferred from below cost prices Ferro’s discrimination in caused no ing. would have a court Williamson find competitive price harm. The selective dis predatory to be if it is below aver practiced by crimination Ferro resulted in age long term when there is a cost over gain Indeed, no in Ferro’s share. market oligopoly when is not loose demand between 1973 and Ferro’s share of the However, declining. we do not read his During peri market decreased. that same analysis price to extend the selective od, Hommel retained its share of the mar presented discrimination context in this position ket and its overall economic im case. William Whatever the merits of the proved. express No evidence of theory pertains son as it to across-the-board record, appears intent and Hommel predatory pricing, difficulty we have in re sought thus to draw inferences of lating theory present circum pricing, relying intent from Ferro’s on Rob stances, which involve no more than lower inson-Patman cases which involved not se pricing for a limited number of customers. discrimination, price geographic lective but Indeed, although responds Williamson Yet, price discrimination. here the record article, the Areeda and Turner Williamson’s price reveals that Ferro’s discrimination analysis aspect does not address that of dispersed throughout the national mar Areeda free and Turner would selec Indeed, price ket. discriminations price regulation. tive discrimination from point which are the focal of Hommel’s ac Thus, we are forced to conclude re tion, were limited to three customers and liance on the Williamson formulation would of affected 5% Ferro’s national sales. misplaced be in a case such as this one grave where we are faced with selective In such circumstances we have res- discrimination.16 any priced ervations whether sales below Williamson, Predatory Pricing: Strategic A firms in the same have different tech- Analysis, nologies. capital may and Welfare 87 Yale L.J. 284 One intensive firm have costs, costs, high fixed and low variable while 16. Williamson competitors may asserts that must be re- its have low fixed costs and munerative, foreseeing long if over the high capital variable costs. The intensive firm run, keeps product a firm its of a below may competitors, not be more efficient than its average not recover all its ex- it will may engage predatory pricing (and but drive This, course, penses. Id. at need 321-22. competitors) by pricing out its above its aver- not be the discrimina- result in selective age average variable cost but below the varia- There, though below-average tion. even cost competitors. ble cost of its Id. at See sales to a select number of customers Posner, also R. Antitrust Law 191-93 sales, result “losses” on those the above-av- justification We fail to understand how this erage during cost sales made the same relative applies technology, when firms share the same recovery period can result in a full of costs. such as in this case. employs Williamson also an cost test hypothetical because of the situation where could, more, judgment Ferro moved any formulation without cost notwithstand- indicative of intent be deemed ing days the verdict within ten of the dis- our review of the record shows it to because Supplementary Judgment trict court’s Or- lessening any substantial be barren 16, 1980, der of June which set the amount tendency any to create a attorneys’ fees. It did not an move for monopoly17 caused Ferro’s discriminato judgment days NOV within ten ry pricing. entry judgment verdict and the thereon. Thus, any particular without relation to agree parties “judg- We with both formula, that no liabil- we are satisfied judgment. ment” means final Rule 54 was incurred ity under Robinson-Patman defines as used in the Federal If, however, were Ferro. we to look “includpng] Rules of Civil Procedure as and Turner thesis to which we have Areeda appeal decree and order from which an attracted, it is evident that our conclu- been 4(a)(4) lies.” Rule of the Federal Rules buttressed, respect sion in this would Appellate course, Procedure assumes that an NOV providing, of that Areeda and Turn- apply theory to a selec- judgment: er would even their motion will be made after final case. 88 Harv.L. tive discrimination timely If a motion under Federal that the Rev. at 725-26. We observe Rules of Procedure Civil is filed in the to at which Ferro sold frit General House- by (i) any party: judg- district court for wares, Briggs and General Electric were all 50(b); (ii) ment under Rule under Rule below, above, variable 52(b) to amend or make additional find- analysis under the of Areeda and fact, ings of whether or not an alteration any Turner could not to of lead inference judgment required of the would be if the predatory pricing. (iii) granted; motion is under Rule 59 to therefore, that “as a matter We conclude judgment; (iv) alter or amend the or law, critically of the record is deficient of trial, Rule under 59 for a new the time from quantum of evidence that minimum appeal parties for for all shall run from might reasonably afford re- which a entry denying of the order a new trial Siegel, Denneny v. 407 F.2d lief.” granting denying any other such 1969). (3d Cir. appeal A motion. notice of filed before III. disposition of above mo- of.the that even if we Hommel contends tions shall have no effect. A new notice insufficient for find the evidence be a appeal pre- of must be filed within liability, judg to find we cannot enter ment for Ferro because Ferro moved for time entry scribed measured from the of judgment notwithstanding the verdict out disposing pro- the order motion as Hommel, According of time. cir this vided above. No additional fees shall be cumstance, we can remand for a new required filing. for such York, trial. See Johnson v. New New 50(b) Rule been had amended in 1963 to R.R., 48, 54, Haven & Hartford provide judgment the motion for a 125, 128, Rule S.Ct. 97 L.Ed. days should be made within ten NOV of the 50(b) of the Federal Rules of Civil Proce entry judgment, days rather than ten provides: dure verdict, reception after the of the so as to entry days No later than 10 after 52(b) 59(b). be consistent with Rules judgment, party who a has moved for Advisory See Notes of Committee on Rule may directed verdict move to have the 50(b), 18 U.S.C.A. at 376 The First any judgment entered there- verdict and “judgment” Circuit has held that in Rule judgment set en- aside and to have 59(b) judgment. means final Warner v. tered in accordance with his motion for a (1st Rossignol,

directed verdict. 513 F.2d 684 n.3 Cir. finding 17. No Ferro’s tend- otherwise for Ferro on the 2§ evidence exists that cided monopoly. ed to create a Indeed the de- Sherman Act claim. court and will reverse district we entry 1975). thus conclude We be entered for Ferro. judgment direct entry of be construed as judgment should judgment. final GIBBONS, Judge, dissenting: Circuit not final until at judgment

A Rich determined. torneys’ fees have been appeals Corporation from an order Jones, (3d 1977). 551 F.2d 918 Cir. erson v. judgment notwith denying its motion for a was over argues that Richerson Hommel by jury in a standing the verdict returned Corp. Raymond Inter Long ruled De Company damages suit Hommel national, Inc., n.3 622 F.2d 1138-39 resulting discrimination in viola panel court (3d Yet a of this of the as tion Section panel precedent. prior cannot overrule by the Robinson-Patman Act. 15 amended Appeals for the Court of United States 13(a). granting The standard for U.S.C. Circuit, Operating Proce Internal Third such a motion is the same as that for the dures, VIII, (1978). To the extent Ch. C§ grant pur of a verdict. For that directed Richerson, De it is inconsistent with complete pose there must be either a ab Long without effect.18 must be deemed proof sence of on an issue material judgment not final until the Since upon, complete cause of action relied or a 16, 1980, order June which established of controverted fact issues on absence fees, attorneys’ Ferro’s NOV motion was which reasonable men could differ. timely, may for Ferro thus if, granted only motion without be entered. evidence, weighing credibility can reasonable conclusion.

there be but one Moreover, grant it is not sufficient for the IV. undisput of a motion that the evidence be ed, long rationally possible us, so below- On the record before conflicting draw inferences from it on the pricing cost to three of its custom- Fireman’s Fund In material fact in issue. competitive no within ers has caused harm F.2d Corp., v. Videfreeze 540 meaning porce- surance Co. the of 15 13 to the U.S.C. 1171, 1178-79 denied, (3d 1976), 429 cert. industry. the lain frit Nor does record dis- 1053, 767, 50 L.Ed.2d 770 explicit any predatory 97 S.Ct. close evidence of in- U.S. (1977); v. Company Neville Chemical Union competitive harm could be tent from which^ Cir.), (3d 422 F.2d 1205 Corporation, Carbide inferred. All Hommel has shown is selec- 826, 51, denied, 91 27 below-average cert. 400 U.S. S.Ct. tive to three cus- (1970). considering L.Ed.2d 55 In the mo evidence falls far tomers of Ferro. This tion, both the trial court and this court establishing short of that Ferro was sacri- light view must the evidence in the most ficing profits hope in the that it short-term party If, favorable to the which obtained the recoup monopoly profits. on this would verdict, give record, party and must to that the we were to sustain Robinson-Pat- supporting which benefit of all inferences it liability, encouraging we the man would be permits, though contrary even evidence very price rigidity uniformity which the and might reasonably inferences drawn. against Supreme warned us in Great Court FTC, Co. v. Continental Ore Union Carbide & Atlantic & Pacific Tea Co. v. 440 U.S. 690, 696, 69, 80, 925, 933, Corp., 370 Carbon U.S. 99 59 L.Ed.2d 153 S.Ct. 1404, 1409, (1962). This stan holding Our would thus run counter review, dard of the narrowest in federal policies the antitrust laws. to the broader n.13, appellate practice, required by the sev 80, Having Id. at 99 at 933. S.Ct. Galloway enth amendment. See United competitive evidence of concluded lacking, States, harm intent and of 63 87 L.Ed. S.Ct. jury 18. We also note that time hand- at the Long ed down its De verdict, had not been decided. multi-national, applying manufacturer, it we must deter- diversified first, plants world,

mine, throughout has 65 what are the material elements manufactures frit at 20 of them. It manu- jury of action on which the of the cause reasonable returned tion 4 of the must establish that one of the antitrust tion which were set out damage could find contends elements of a Robinson-Patman Act viola- mel’s business by there is no evidence from which a that violation. Ferro contends that dence charge, A plaintiff seeking damages under from which the to his business stipulated further, either jury verdict, violation property. could have found them. that even if there was erroneous as a mat- facts and the evidence a laws and must show or defendant second, property 15 U.S.C. § could infer the On injury violation, whether to Hom- violated court’s caused is evi- jury Sec- plant use were: respective shares of total frit sales for that volved tion, to and sale of frit and other materials needed Five factures in Hommel’s Year Ferro Vitreous Pcmco Cleveland, Nashville, produce manufacturers 41% 42% 43% 40% 42% manufacturers of frit for Carnegie, Pennsylvania. frit in this case sole Chicago 25% 23% 25% 23% 24% glaze product. business is the manufacture the United porcelain were, 22% 25% 22% 21% 24% the United States and Los enamel, porcelain with one Hommel Richardson States 7% 7% It has one and their at Sales in- Angeles. Ingraham- enamel. excep- plants 4% 7% 6% 5% 5% Reviewing ter of law. record porcelain The sales of enamel frit about review, appropriate I am not standard complains which Hommel were made to persuaded that there is no evidence from Briggs Manufacturing Company, a manu- could find the material ele- stampings facturer of steel for use at Briggs’ manufacturing plant ments of a violation as defined in the bathtub Knoxville, Moreover, Tennessee, House- court’s instruction. that instruc- General Corporation wares its interpretation use Terre tion is consistent with the Haute, pot pan plant, Indiana steel Supreme announced Section to General Electric Co. for use at its Louis- Finally, there is evidence from Court. ville, Kentucky large appliance plant. Two which the could find that Hommel lost porcelain or more of the enamel frit manu- profits as a result of Ferro’s sales below competed facturers listed above for sales to cost to selected customers. Thus I would plants. three these The sales of frit for affirm. pottery complains about which Hommel Pottery Company were made to Socio for I. Socio, plant use in its dinnerware in Ohio. stipulated facts establish that both competed Ferro and Hommel for sales to Ferro and Hommel are manufacturers of an plant. porcelain Total sales of frit for frit, ingre- industrial raw material called an by enamel the five American manufactur- bathtubs, dient in the enamel finish of lava- product, pounds, ers of that in were: tories, major appliances and consumer such 180,188 stoves, washing refrigera- as machines and 144,243 processed by tors. This raw material is 101,484 products por- manufacturers of those into a 125,936 134,397 “slip,” applied celain enamel which is as a dried, coating, and fused heat to During years those Ferro sold frit to each porcelain enamel finish. Frit is also the plants prices of the listed above at below its glaze coating basic raw material for the on published price list and below the dishes, pottery products and both such charged to other customers for frit of like custom, Hommel and Ferro manufacture frit for grade quality. It was types Hommel, shipments freight this use. and of both Sales followed to extend a Ferro, equalize freight commerce. allowance to cost to the of frit are in interstate plant jury customer’s with that from nearest could conclude that Ferro’s calcula- plant. competitor’s The difference average tion of variable cost included direct freight Carnegie, Pennsylvania, from to the cost, manufacturing but excluded the cost Knoxville, Briggs plant in and from Ferro’s sale, procuring of salesman’s bonus for plant per hun- Nashville in 1974 was $.69 the cost of Briggs technical service to and pounds. freight dred The difference Electric, expenses General of the sales Carnegie Electric’s to General Louis- representative who serviced General House- plant plant ville and from Ferro’s Nashville wares, the cost of additional workmen’s freight in 1976 was difference $.96. compensation premiums insurance and un- shipped to General Housewares’ Terre employment insurance contributions on ad- Haute, plant Carnegie Indiana and the payroll, ditional invoicing, and the cost of through plants Nashville in 1973 $.30 bookkeeping, collecting of the three 1975; in 1977. $.35 1976 and Thus in $.38 Assuming accounts. found that all the three instances in which sales were these items were excluded from Ferro’s cal- made to at industrial customers be- average culation of variable it could charged grade low those others for like conclude that Ferro’s were below quality, plant the favored was one as to what recapture would all fixed costs and plant which Ferro’s Nashville had some costs, several variable although above its competitive advantage over Hommel vir- average manufacturing direct costs. The proximity. tue of jury could find from the evidence that the stipulated In addition to the facts almost discounts sporadic were not occasional or two hundred exhibits were received in evi- response incidents in competition, but testimony dence and the heard the given were to the favored customers over a witnesses, including fifteen an economist period years. They of four could find that expert stipulated for each side. From the kept the discounts were secret and could evidentiary facts and these sources the reasonably purpose infer that large could find that Ferro is a diversified secrecy was so that plants using owners of $250,000,000 company with assets over frit as a raw material located elsewhere $150,000,000, a net worth of and an them, would not learn of equal and demand profit $23,000,000. annual From this treatment. they Moreover reasonably could deep pocket position it was in a to sustain plants infer that the three chosen for below product sales of one than less total cost pricing plants which, were because long period. over a plant, Hommel has one respective of their locations Ferro’s Nash- $2,500,000, a net worth of annual sales of plant ville Carnegie plant Hommel’s $7,000,000, years and in the five involved logical were the most competitive suppliers. operated $7,000. at an annual loss of Thus letter, There was “smoking gun” no saying position inwas no to make sales below purpose of the below cost any protracted period. total cost for express was for the excluding intention of plants selected three for the business of Hommel from at the three loca- which its manufacturing Nashville frit tions, totality but from the of the evidence plant logical supplier, was a to which it jury could infer that this was Ferro’s years made sales over a number of purpose, Finally, and thus we must do so. published prices below its and be- jury that, evidence the could find price charged low the products to others for cost, but for Ferro’s sales below Hommel grade of quality, like but also below its years would in question in have re- average production total cost for the of the tained or obtained a share of the market product. maintains, and Hommel dis- represented by each of plants. the three putes, that the evidence is that all the question average pattern in were Thus the jury above vari- fact before the able costs. The difference between them is that of an in which there were five rivals, over what should be included in the term plants established two of which had variable costs. From the evidence which reason of location could economi- ” Knoxville, of such . . . supply users located at discrimination. See William cally frit Inglis & Sons v. ITT Continental Bak- and Terre Haute. Sales indus- Louisville Co., ing (N.D.Cal.1978). 1975, F.Supp. through declined from 1973 try-wide Where no evidence there is direct of an upward Although there turned in but attempt monopolize under Section of which a conclusion of was evidence from injury the Sherman Act or a likelihood of permanent excess ca- declining demand and competition Robinson-Patman, under reached, jury could rea- pacity could be showings may these be inferred from a sonably that the downturn was the conclude intent, showing and this in- general economy, temporary result of the tent, Acts, may under both be established upturn sug- in 1976 and 1977 and that by proof predatory pricing. Utah Pie relatively industry situation of gested an Baking v. Continental Co. would, Either inference stable demand. evidence, rationally possible, entire be (1967).. . . and thus we must assume major dispute issue in in this case which, light of the made the inference predatory pric concerns the nature of the charge, supports the verdict. ing evidence which will be admissible at verdict, special an- returned a permit trial to the inference of swering affirmatively questions “[h]as intent. Plaintiff contends that evidence 2(a) violated ... the defendant permissible of sales below total cost Act,” the defendants’ and “[h]as argues while defendant that sales below proximate ... been the cause of violation cost,1 marginal or at least variable any injury plaintiff’s business.” Fer- to the required may predato before a infer notwithstanding judgment ro’s motion ry intent. requires the verdict that we consider whether those answers have factual 1Marginal manufacturing cost is the cost of support. judgment a motion for Since on “the last unit.” Variable costs are costs that vary changes output, distinguished may notwithstanding the verdict the court costs,” from “fixed remain constant de- consider whether a new trial should be spite changes output. The use of variable 50(b), (d), granted, we must Fed.R.Civ.P. marginal cost as a substitute for issue in this case. cost is not an propriety also of the court’s consider charge. Corp., F.Supp. O. Hommel Co. v. Ferro (W.D.Pa.1979). Rejecting Ferro’s

II. contention that evidence of sales below to- excluded, summary charge, tal cost should be turning Before to the it is worth entered, the court ruled: noting rejecting pre-trial summary judgment circumstances, course, motion for trial In some sales understanding of the ele- court disclosed his below total cost enhance though particular competitor may of a violation. ments Section even injured. a result would be con- Such prima facie In order to establish a Rob- goal sistent with the of the antitrust violation, plaintiff inson-Patman must circumstances, however, laws. In other 1) purchases show that one or more of the permit sales below total cost could an commerce,” 2) involved is “in there monopolistic inference of in- has been a discrimination in be- tent. A determination of these issues purchasers products like tween summary cannot be made on a motion for 3) grade quality, the effect judgment; it must await a full trial on “may discrimination be sub- the merits. stantially competition or tend to to lessen any pretrial monopoly F.Supp. create a in line of com- at 796. Thus even at it merce, injure, destroy, prevent or Ferro’s contention that as a matter of or to was competition any person who either no sales above variable cost could law finding any support in circumstances a grants knowingly receives the benefit ever or position, position of a violation. Section That was that the need court look no which it advanced on its for also motion further. Additional evidence from which verdict, judgment notwithstanding the might jury predatory the could, infer intent accepted judg would if entitle Ferro to a theory, on this be disregarded. ment in its favor even if there was other charge rejected The court in its the con- independent evidence from which that average tention sales above direct was intent could inferred.1 It clear manufacturing costs in must all circum- throughout the case that discrimina as a stances matter of law be immune from Louisville, tions were made available to the liability primary Robinson-Patman in line Terre Haute Knoxville and customers and competition Instead, charged: case. it dispute there was no real over whether the Now, charge you that, I where there is prices plants sales to those were below total competition among members of a rela- disputed cost. The main issue in the case tively stable industry, particularly where ruling was that in the identified the one the members manufactures summary judgment; motion for whether product question, case, the in frit, in this totality from the of the circumstances the porcelain glaze, or each manufacturer jury permitted should be to that infer the charge which, prices period should over a discriminations were made with of, say, years, four as in this should would, intent. an as Such intention the cost; equal and, the total if a less noted, support trial court the in additional the than total cost has been effected or injury competi ference of likelihood of to charged by manufacturer, then, the such tion. pricing may amount pricing; to Although appeal in Point II of its brief on is, pricing injure intended to a com- urges judgment that it is entitled to petitor. course, Of to continue to per a matter law because Hommel’s period less than total cost in this of time centage share of the total frit market did force could one or competi- more of the years question, decline in the in tors in the frit industry bankruptcy. into ground was not the advanced in its motion your You must make you all costs or are judgment notwithstanding the verdict. going go broke. pre-trial, Both summary when moved for (Ill A, 912). judgment, post-trial, part This the charge when it moved for de- verdict, what, notwithstanding stipulated Fer scribed facts and evidence, ro contended that because the contested could have found: average were above its industry stable, direct cost of that the relatively was production it was entitled to a verdict as a it, Hommel, that one manufacturer (Ill A, 802). matter of legal law.2 Ferro’s in no financial condition to sell below total Actually grounds support (I A, 163-64). (Emphasis supplied). advanced in position sought ruling motion refined Ferro’s somewhat. Thus it that in all circumstanc- They average included: es sales at facturing above direct manu- costs, excluding costs, other (a) variable proofs, light taken in the most favor- primary were in line plaintiff, Robinson-Patman case Company, able to the O. Hommel permissible. as a matter of law text, law, defendant, As noted in the establish as a matter of product there was average evidence from which the its above its varia- could infer that product, some variable costs were ex- ble cost injure, such did not adversely average cluded calculation its lessen affect produce. cost frit variable within the or otherwise violate standards set down the Robin- Arguably the contention about Hommel’s son-Patman Amendment to the Act. steady market (b) upon trial, share was advanced at proofs least Based adduced at cryptically light plain- the motion for a directed verdict taken in the tiff, most favorable to (III A, reasonably contention was not made to could not conclude post-trial porcelain or discussed the trial sold court defendant either enamel A, (I pottery proceeding. 195-210). frit relevant between market 1973 and 1977 at a below its produce. variable determining period years. jury If the so whether such over a conduct cost others, found, could, predatory preying upon was charged, was the court it but — merely competition, you is—or lawful to, required infer that the differ- may consider whether or not the Defend- injure Hommel as entials were intended enjoyed position ant a dominant in the competitor. time, frit market at the or whether there hand, continued, the other the court On healthy, competitors were active for the the in- there were circumstances may business. You consider whether predatory intent was in its view ference of production capacity there was excess impermissible. among competitors the various in the frit However, you were to find that business, making price competition natu- declining during frit was market for rally aggressive, more since it is obvious years 1973 to and that the frit in- that, business, declining in a it is better dustry declining industry, was a plant product for a some large unused ca- there was a amount of sell it at a that covers at least its then, charged by pacity, manu- manufacturing expenses, direct than to only equal average facturers need machinery its allow and workmen to costs; is, direct manu- stand around variable idle.

facturing costs. You consider whether or not there potential competi- were barriers to new A, (Ill 913). part charge This of the also entering tors competi- the frit business in what, evidence, conflicting described tion with Defendant and Plaintiff. You jury could have found: that the indus- should consider these and all the other try permanent large was in a decline with a determining circumstances in the case in ease, capacity. unused In that the court whether the at which Ferro sold frit clear, predatory made the inference in- customers, to some of its as testified in long tent could not be made so as sales were or not. made, long period, even over a at less than (Ill A, 913-14). charged Thus the court average total but more than direct manu- could, jury certainly but did not facturing part charge costs. This to, have infer a intention if actually more favorable to the defendant (1) in industry a stable Ferro sold below marginal than formulation of a long period, total cost over a in a predatory pricing proposed floor for declining industry average it sold below di- secondary literature on the Robinson-Pat- manufacturing rect costs. There was evi- man for even the Areeda and Turner jury legitimate- dence from which the could generally formulation is refer considered to ly upturn draw either inference. The long rather than run short run supports sales 1976 and 1977 an inference marginal below fixed but above costs. See long-term stability. reasonable The evi- Williamson, Predatory Pricing: O. E. A dence that variable additional labor costs Strategic Analysis, and Welfare 87 Yale compensation premiums for workmen’s question L.J. 322 n. 88 That unemployment insurance contributions was decided, however, need not be for we must not taken into account casts doubt on Fer- jury assume that followed the instruc- recaptured ro’s contention that it all varia- tion that if found the to be a manufacturing ble costs. one, declining it could not infer charged The court to “consider average intent from sales above direct man- geographic whether or not discriminations ufacturing costs. employed by preda- were the Defendant for inquiry limited the area of found, tory ends.” If the he so contin- predatory intent still further. Even if the ued, you may is evidence from which “[t]hat relatively industry, found a stable properly discriminatory conclude that manufacturing sales prices may required below direct have had the effect costs, A, (Ill upon competition.” it must consider other This in- factors: position in to by compete an mel was no for busi- qualified still further

struction term, selling, long instruction: ness below geographic disadvantages likelihood in requires that a Hommel had The Act [sic] impact attributa- competitive plants adverse competing business in more dis- ei- price discrimination to unlawful ble Carnegie, its loss in a tant from and that one, a substantial the form of ther in likely industry would be company five two, or, a tend- lessening competition, competition an adverse effect on have monopoly. ency to create industry. was evidence from There A, considering likelihood (Ill the might a different conclusion which competitive impact even from adverse drawn, sup- must make that which but we jury predatory pricing, the intentionally ports the verdict. was instructed: only objection which makes to The course, should, connec- in this You per- charge part is to that of it the giv- the instructions I have tion consider below mitted the to find sales declining indus- you previously as to a en costs, but above direct manu- total emphasize that the Act is try. I must costs, facturing period continued over a the effect of dis- concerned with time, supported an inference of competition upon the state of crimination Appellant’s p. 42-46. It intention. Brief upon its effect an individual and not with charge unprecedented. as describes competitor said that as such. It has been so, hardly Pie That is for in Utah Co. vigor competi- injury center is the 685, 698, Baking Continental marketplace rather than a tion in the (1967), hardship the individual businessman. Court, reversing Supreme a Tenth Cir- primarily concerned with the The Act which set verdict competitive process, not cuit decision aside health of the competitor who must primary the individual in a line noted enterprise competitive sink or swim in a offending price was less than de- crippling system. competitor The of a plus “direct cost an allocation for fendant’s an event of price discrimination is not given The was more overhead.” independent significance, is relevant but than that which the Utah Pie favorable necessary injury as a incident.of authorize, required appears court for it purposes competition generally. For the findings mar- the additional of reasonable only against the back- of the Act it is stability continuation over time. ket ground competitive structure that precedent on which Ferro relies is a competitor of the individual fate one, Turner, secondary P. Areeda and D. significant. competitors are so nu- If the Predatory Pricing and Related Practices the elimination of one will merous that 2 of the Under Section Sherman upon the only have an infinitesimal effect Harv.L.Rev. 697 This article first area, competi- business in the then overall suggested analysis which since the be- injured. tion not been On the other has ginning of the case Ferro has insisted is hand, relatively there are few com- where required as a matter of law. As the trial petitors industry, injury in an to one observed, judge may competitive shatter structure however, analysis, Areeda and Turner’s may lead tend to lead to to — Wil- has not survived unscathed. See 0. monopoly. liamson, Pricing: Strategic “Predatory A (Ill A, 921). evidence Clearly there was Analysis,” 87 Yale L.Rev. and Welfare from which the could conclude (1977); Scherer, “Predatory Pricing discriminatory plants pric- three chosen for Comment,” 89 and the Act: A Sherman Knoxville, ing, Briggs in General Electric in Scherer, (1976); “Some Harv.L.Rev. Louisville, and General Housewares Pricing,” Predatory Last Words on Haute, in order to ex- Terre were selected Harv.L.Rev. 901 plants, that Hom- clude Hommel from those join are, as the F.Supp. Carnegie plants at 796. But we need not Nashville and deep debate between Areeda and Turner and one of them owned diversified pocket company the relative mer- and the other a small fami- their several critics about ly general. business —the inference of marginal its of in- long tention from term below charge objects requires which Ferro sales total but, compelled not cost is as the court finding relatively of a stable market and charged, certainly legitimate. jury The below total cost sales over least four could well have reasoned that Ferro years industry in an whose customers are .intend- deprive Briggs, ed to Hommel of the Knox- large, single plants, situs industrial and se- ville; Louisville; Electric, General and Gen- by company the the lective cuts with Housewares, eral Terre Haute businesses deepest pocket plants for which the pricing, knowing below cost freight that competitor weakest is a differentials plants insulated its other frit logical competitor. charge permitted, competition Carnegie, from from in the ex- require, preda- but did not the inference of pectation that Hommel would fail and that tory bearing A on intent. factor in- there entry were sufficient barriers to secrecy discriminatory tent was the replaced. it would not soon be See Joskow pricing arrangements, which could be found Klevorick, Analyzing & A Framework for designed pro- jury the to have been Predatory Pricing Policy, 89 Yale L.J. plants tect the level of more dis- 227-31 (discussing multiple the fac- Hommel, from and thus more shielded tant may entry). tors be barriers to If competition by freight differentials. the recent case Telephone of Northeastern sup- If that set of circumstances would not AT&T, (2d 1981), v. Co. F.2d 76 port an inference of intention may committing be read as the Second Cir- analysis Turner under the Areeda and pricing cuit to the rule marginal above (which suggest), analysis I not the do always legal, cost is in all circumstances I flawed, strongly for those circumstances it, would not follow because such a rule suggest on a an intentional move financial- would exclude from the factfinder the au- ly competitor weak but effective otherwise thority legitimate to draw a inference of large buyers for the frit trade of those totality intention from the of cir- they where located can be serviced Fer- Supreme cumstances. The Court affirmed plant. ro’s Nashville The Areeda and Turn- legitimacy the of such an inference in Utah marginal er thesis is cost Co., Pie Baking Co. Continental 386 U.S. presumptively rational conduct in the short S.Ct. profit maximizing run because it is either reject Thus I would Ferro’s claim that the Thus, minimizing. argument goes, loss the charge respect was error in the one com- inference intent is irration- plained of. long policy run al. But of sales profit maximizing. below total cost is not III. plant If Ferro’s Nashville were to continue long sales below total costs over the term it appeal claims on that even if the profit would cease to be a center in Ferro’s predatory pricing was correct and compete diversified business. If it could supports pred- the evidence inference competitor with the which was located near intention, atory judgment it is entitled to a enough to users of frit which the Nashville notwithstanding nevertheless, the verdict plant supply only by selling could below any proof because there was no adverse profit maximizing policy a rational competition. effect on That contention was plant, would be to close the not to subsidize among grounds not listed advanced in permanently. Thus in the sum of circum- judgment Ferro’s motion for notwithstand- stances which ing could find here —a the verdict. In the motion for a direct- advanced, market, relatively plants point two located ed albeit stable verdict was cryptically.3 point Since raised be claim. distinction made in Truett here, low it can be considered at least as a Payne juris is not new to Robinson-Patman trial, ground perhaps a new for as a prudence. See Utah Pie v.Co. Continental ground ordering entry Baking 685, 702, S.Ct. notwithstanding posi the verdict.4 Ferro’s 1326, 1335, 18 L.Ed.2d 406 tion is that because the market shares of evaluating the likelihood of harm to the five firms which manufactured frit did Ferro, could con- significantly change years over the sider the strength relative financial of Fer- question, as a matter of law the could Hommel, ro and the location of the three not find that “the effect of such discrimina plants which were selected for below total substantially tion competi to lessen pricing, cuts, duration of the commerce, tion ... line of or to stipulated and the fact that Hommel main- injure, destroy, prevent competition with tained its 6-7% market share over the four 13(a). argu 15 U.S.C. [Ferro]”. years in incurring issue while operating however, ment, misconceives prophylac year. losses in each jury may well purposes tic of the Robinson-Patman Act. have concluded operating those losses discriminatory Faced with pri would not have occurred if Ferro had been mary competitor required line is not to wait Briggs able to retain some of the and Gen- injury until the cause of action for to its eral Electric and obtain some of the General property business or vests in a trustee in Housewares business. It could have found bankruptcy. injunc Indeed it can sue for that Hommel could not increase its share of tive relief even before harm to its business at the limited number of industrial occurred, property although business or has plants which used frit as a raw material recovery in such a case the damages trade, because the custom of freight under Section 4 of the Act would equalized was producer’s to the nearest impermissible. be The distinction between plant, absorption freight to distant requirements proving 2(a) for a Section customers would increase operating its loss- proving violation and those for damages es. It could have found that the cuts recoverable important under 4 is an Section exposed Hommel to the risk bankruptcy, reemphasized by one which was the Su industry in an with only suppliers. five preme Truett-Payne Court in Chrys Co. v. Short of this it could have found Corp., - U.S. -, ler Motors 101 S.Ct. freezing out logical Hommel from three 1923, There the customers, Ferro forced Hommel to com- majority rejected contention, Court’s pete with it for customers as to which one relied on dissenting, Justice Powell plants of its other freight had a plaintiff’s differential because market share did not advantage, place shrink would a floor year period, over four he under could not competitors’ prices. short, its 2(a) establish a Section violation. there The test ample whether, for a evidence possibility Section violation is of harm to evidence, competition based on the competition, general overall frit discriminator, injured. with the competition be and of particular. with Ferro in Actual harm is damage relevant to the possibility coupled of such harm attorney argued: A, (III 517). 3. Ferro’s On the Robinson-Patman we have two Virginia Pulp Paper 4. But cf. Cone v. West & One, bases for our motion. in a like Co., 212, 752, 330 U.S. 67 S.Ct. 91 L.Ed. 849 requisite there is the same (1947); Liquor Roman, Globe Co. v. San All, showing damage competition. 571, 246, (1948); 68 S.Ct. 92 L.Ed. 177 again, that has been shown is that Hommel York, v. Johnson New Railroad, New Haven & Hartford might gotten have sales. That is the best 48, 125, 344 U.S. 97 L.Ed. 77 Nobody that was testified to. market —their (1952); Metropolitan Garman v. Life Ins. same; nobody share was the was excluded (3d 175 F.2d Easy entry from the market. into the market juncture by is all established at this the evi- dence. be inferred legitimately pricing which could SERVICES, establish a vio- suffices to predatory, WELLS FARGO GUARD Services, 2(a). of Baker Protective

lation of Section Division Inc., Petitioner, IV. proof point is that Hommel’s Ferro’s final NATIONAL LABOR RELATIONS satisfy the standard of damages does not BOARD, Respondent. Clay required by 4 of the

certainty Section No. 80-2427. the court’s It concedes that ton Act. Appeals, United States Court profits was corr proving lost net Third Circuit. urges that Hommel’s evi ect.5 But would have in establishes that dence Argued July expenses in or additional overhead curred Sept. Decided might frit it have the extra der illegal pricing, and that the for the sold but damage fails to take such ex award However

pense into account. testimony 0. Hommel: of Richard

heard

Q. you produced had an you Would —if 3,000,000 2,000,000 pounds,

additional year, you say you

pounds a done, you would have had

could have costs, than the

any additional other you the items have

materials and

read us? any major consequences. Nothing of

A. A, 40). testimony,

(II If it credited damages to calculate

jury was entitled taking account without into

lost sales expense. Thus Ferro’s overhead

additional challenge amount of the verdict

sole to the ample There is evidence

is misdirected. jury could find lost net

from which the

profits.

V. the order of the district

I would affirm denying motion for

court

notwithstanding the verdict. sold, goods in- charged: sales minus the cost The court costs, cluding and minus labor and material profits, you that lost net instruct [I] expenses operating overhead. taxes, may an item of actu- before constitute A, (Ill damages profit antitrust cases. Net al revenue received from before tax is the total

Case Details

Case Name: O. Hommel Company v. Ferro Corporation

Court Name: Court of Appeals for the Third Circuit

Date Published: Sep 23, 1981

Citation: 659 F.2d 340

Docket Number: 80-2062, 80-2723

Court Abbreviation: 3rd Cir.