*1 Jan. 30706. No. 1978.] [L.A. al., Plaintiffs, et A. MAILAND

WILFRED v.

Cross-defendants Appellants, Defendants, al., et BURCKLE

ARTHUR JOHN and Appellants.

Cross-complainants

Counsel Harmer, Carmack, Johnson, Roberts, Carmack, & Roberts, Johnson Plaintiffs, Carmack for Harmer, Hal Visick and John K. & H. Poulson and Cross-defendants Appellants. Defendants, Cross- D. T. Heuer

Robert Hombaker Henry and Appellants. complainants

Opinion Plaintiffs, Mailand, franchisees, as

MOSK, J. Wilfred and Margaret Burckle, into an with Arthur and Lois Geraldine entered defendants) (hereinafter Paul Hassan and Green Pastures Daily Gasoline as well a Palmdale drive-in owned defendants. operate dairy on as were sold The agreement required dairy products premises. (Powerine), Oil Company purchase gasoline set the could provided of 7 for guaranteed plaintiffs, exchange profit percent *5 sales. Defendants collected a rebate from Powerine for each gasoline sold of gasoline gallon plaintiffs.

After almost of under two the agreement years operating plaintiffs, to allow defendants set refusing prices, purchased gasoline from another filed an action defendants and They supplier. against Powerine, the and the between alleging agreement arrangement Powerine violated section 16720 of the Business and Code, & Professions a included in Act. (Bus. Cartwright provision Code, 16700 et in treble the amount Prof. § seq.)1 They sought damages Code, unless are Business and Professions to the 1All references this opinion noted. otherwise or acts two of skill or trust is a combination “A capital, provides: Section following for of the any purposes: more persons or commerce. or restrictions in trade “(a) To create out carry merchandise of any of or or or increase To limit reduce the “(b) production, commodity. or sale “(c) transportation, To manufacturing, making, prevent competition merchandise, or commodity. purchase produce any shall its or consumer “(d) fix at or whereby public To standard any figure, merchandise, established, or article or commodity be in manner controlled any any sale, barter, in this State. for use or or commerce intended consumption produce contracts, or or execute out “(e) obligations To make enter into or or carry any or combination do all or any any kind or agreements any description, by the following: any of the defendants, rebates Powerine had and an paid injunction defendants the invalidating provisions agreement giving power to set the at which requiring plaintiffs Other law also from Powerine. violations of purchase gasoline alleged.2 relief, deter-

Defendants declaratory seeking cross-complained Act, that if such a mination that had not violated Cartwright void, was null and and that violation was found agreement had breached the agreement.

The trial court found that the and the rebate arrangement between defendants and Powerine did violate section 16720. As to court found that defendants were not cross-complaint, damaged conduct. Both and defendants from the by plaintiffs’ appeal ensuing judgment.3 issues to be determined are whether the franchise primary and the rebate between Powerine and defen- and, so,

dants violated section 16720 if whether defendants assert may the doctrine of in delicto as a defense to such violations. pari Appeal

Plaintiffs’ Lancaster, and station in Defendants operated dairy Palmdale, Pastures Drive-In one in under the name “Green Dairy.” sell, “(1) Bind themselves not to of or article or dispose any transport any commodity trade, use, merchandise, or article of commerce or below a common any consumption *6 standard fixed or value. figure, article, “(2) manner to the of such or Agree any keep price commodity at a fixed or transportation graduated figure. article, “(3) Establish or settle the of or between price any commodity transportation others, them or themselves and- so as or to a free and directly indirectly preclude themselves, unrestricted or or consumers in the sale competition among any purchasers or of such article or any commodity. transportation unite “(4) combine or or interests that any Agree pool, directly indirectly they may the such article or that its have connected with sale or transportation any commodity, manner be affected.” price might any that defendants and Powerine violated sections 2A second cause of action alleged 17045, 17049, 17040, for secret rebates to be 17048 and in that arranged paid by they defendants, discrimination. A third and defendants were of locality Powerine guilty fraudulent conduct on the of defendants and Powerine. cause of action alleged part $19,000 trial, 3Powerine settled with for before that plaintiffs stipulated (Code award receive from defendants be reduced would sum. any damage by Proc., 877.) Civ. § sheriff; from was a retiring Mailand he. contemplated deputy after his an established business to and was seeking operate position, the defendants on a number of occasions He discussed with retirement. the in Palmdale under a franchise arrange- leasing dairy possibility ment. In these Mailand over negotiations, expressed apprehension war, a a declined to enter into consequences gas unless he was a on the sale of One agreement guaranteed profit gasoline. the defendants he indicated would be such willing provide on condition that defendants be allowed to set the guarantee price sold gasoline by plaintiffs.

In October to the time the prior agreement signed, at defendants’ the Palmdale store for gasoline agreed, request, charge at a to be set defendants and to rebate to defendants price fixed difference between Powerine’s normal and the selling price told Mailand that the latter would defendants. One of whether this 25.6 or 25.8 cents a for he not state gasoline; pay gallon fact, than was the wholesale market In it was several cents higher price. market prevailing price. the franchise Thereafter, drafted defendants’ agreement, attorney “With 5(d): contained the which following paragraph provision .. . the leased to the gasoline through premises [defendants] respect . . . in return for to set the guaranteeing gas prices retain[s] sales.” The of seven on (7) gasoline gross margin percent [plaintiffs] that if on this to mean plaintiffs’ profit provision parties interpreted defendants would make sales fell below up percent, and if realized and 7 difference between profit they percent, it, could sell than for more paid at which the difference between the defendants would them pay sold, Another and 7 of the sáles price. provision' they bought percent Powerine, required purchase with the written consent them to substitute another but allowed supplier three months’ could terminate the of defendants. Plaintiffs notice. *7 on the

The was for a of 10 and a lease agreement period years, $10,000 executed the same term. for Plaintiffs paid premises fee, addition, and were defendants as an initial obligated as rent and sales as income gross gross pay percent percent $1,050 but no less than monthly. royalties,

After an initial which Mailand worked at the Palmdale period during an as he under dairy employee, began operating 1969. Defendants determined the to be January gasoline prices charged set the at a rate which was by plaintiffs; prices competitive other retailers. prices charged by 1970,

Between and November there was a war in May gasoline price area, the Palmdale and some of were forced out of plaintiffs’ competitors business. this $20,000 defendants over During period, paid plaintiffs to section guaranteed 5(d) profits pursuant agreement. During 1969 and defendants contacted from time to time and instructed to bill three or four cents a over the normal plaintiffs gallon for and the sums in excess of the price charged market gasoline, were Powerine to defendants. Over a paid by these two-year period, $61,442. rebates amounted to

Plaintiffs became dissatisfied with the were price they required pay for and in October 1970 consulted an who advised attorney, them that the with defendants constituted a violation of the arrangement 30, 1970, antitrust laws. On November filed an antitrust action plaintiffs courts, in the federal but it was dismissed on the jurisdictional ground that the Powerine to did not involve interstate plaintiffs 30, 1970, commerce. then filed the action. After November They present refused to allow defendants to set the selling price gasoline, did not from Powerine. never buy gasoline They requested defendants to allow them to another from purchase gasoline supplier.

The action was Powerine, filed both present against violations alia, of section 16720. It was inter alleged alleged, Powerine and defendants fixed the at which the former would sell without to the effect free regard upon competition, from prevented purchasing gasoline competitors Powerine, and that the rebate between Powerine and arrangement defendants was not revealed to as plaintiffs. prayer sought damages $61,442, treble the amount of the sum Powerine to defendants in paid by rebates.4

The trial court determined that neither the franchise nor between Powerine and defendants violated section 16720. It found as follows: knew Plaintiffs when they signed 4Plaintiffs the same amount of in the second cause sought damages of action. The third action, fraud, cause of added a for prayer punitive damages. *8 5(d) to the in set that the gas paragraph “right prices” phrase both the at which the to set gas defendants right price plaintiffs gave it; would that knew at which could and the they they they purchase price of the their the market they to gasoline be price required pay supplier the a fund of which to establish out guaranteed markup purchased plus act to collect the as would be and that would agent paid; supplier, profit and it over to defendants.5 Powerine the participate pay markup as and acted defendants’ in the amount determining markup, those to defendants. in and sums collecting agent paying in The continue: It was reasonable to include a the clause findings defendants set the at to agreement allowing such could sell because without reserved gasoline power plaintiffs defendants, to could have caused serious financial detriment plaintiffs could have the of below its cost in since lowered they gasoline sales, the to increase the volume of and collected maximum order fix the The right profit. provision affording guaranteed was also reasonable because defendants’ rents selling price sales, income and reputation royalties depended gross had on the the Palmdale plaintiffs dairy depended gasoline prices, were in no Defendants justified setting experience competitive pricing. in order to at which from bought gas plaintiffs be a fund out of which the would establish guaranteed paid. profit that from Powerine or another requirement plaintiffs purchase to assure a defendants was reasonable order supplier approved be sold under defendants’ continuous high supply quality trade name. were all acts in the

Plaintiffs involved in “truly alleged” complaint, acts, those if in and received benefit of any participated occurred, law were barred from were in delicto and violations they pari court, found the failed mitigate recovering.6 Finally, knew at least as as 1969 that defendants because early damages they July were rebates from Powerine but refused either to terminate the receiving that the 5These are in which the court determined inconsistent findings finding in this pf the was riot disclosed to until proceedings discovery payment action. This contradiction markups we shall reach that is irrelevant the conclusion light that had was evidence the court’s there insufficient determination support on the would be they charged markup before knowledge signed from Powerine. gasoline they purchased hands, 6It was also were of unclean waived their found that plaintiffs guilty they recover, and had because recovering damages estopped in and received the benefit” of the acts alleged complaint. “requested, participated *9 376 which defen- under or to a modification to agree

dants would have guaranteed directly paid of sales a 9 “commission” gross gasoline.7 percent of the franchise assert that the Plaintiffs provision at which could sell to fix the price permitting Powerine and defendants between gasoline, at to which Powerine sold the latter set allowing We se of section 16720. violation constituted price fixing, per agree. review, Certain viola

We several initially, general principles. are deemed to constitute an restraint tions the antitrust laws illegal Since the trade as a matter of law. these are Among price fixing. 1 et Act (15 Act is after the Sherman U.S.C. § Cartwright seq.), patterned Sherman Act are federal cases construing applicable interpreting Realtors, Inc. 16 our state Bd. v. Palsson (Marin (1976) laws.8 County 1, 920, 833]; 925 549 P.2d Oakland-Alameda Cal.3d Cal.Rptr. [130 4 v. F. P. Constr. Co. Cal.3d (1971) Builders’ County Lathrop Exchange 354, 362, 602, 482 fn. 3 P.2d 226].) Cal.Rptr. [93 218, 150, 221 310 U.S.

In Oil Co. U.S. v. (1940) Socony-Vacuum [84 1165, 1167, Court 1129, the United States 811], L.Ed. 60 S.Ct. Supreme declared, has and without over this Court consistently forty years “[F]or are to the deviation adhered agreements price-fixing principle that no so-called se under the Sherman Act and unlawful showing per or abuses evils those designed agreements competitive as a .... alleviate be defense eliminate or Any may interposed an is combination which structures engaged tampers Even the members of the unlawful group activity. though price-fixing raised, market, were in control extent no position lowered, with the would be or stabilized interfering directly prices Act such schemes free market The all forces. places play [Sherman] that vital of our economy against any beyond pale protects part degree of interference.” 7 second and third favor on both the in defendants’ trial court found similarly

causes of action. Act, 8The was once referred as “California’s Cartwright adopted Sleeping (Note 200). (1949) 2 In its first 42 produced only Stan.L.Rev. Beauty” years reported decisions, It has won more attention in recent years, litigants. perhaps by private “Californians, Americans, (Id. like competitive economy." because most believe in 210.) p. Nor is it that the set to a scheme significant prices pursuant price-fixing reasonable, are for the fixed “reasonable may today through *10 economic and the business become unreasonable changes price 392, tomorrow.” States v. Trenton Potteries 273 U.S. 397 (United (1927) 700, 377, 705, L.Ed. 50 A.L.R. 989].) 47.S.Ct. [71

This court has Act similarly Cartwright interpreted determined, stated, with must be we have prohibit tampering prices; they of the economic forces of and demand.” by “interplay supply v. 34, Board Fire Underwriters 29 Cal.2d 44 P.2d (1946) (Speegle [172 867].) These rules whether the scheme is horizontal or apply price-fixing vertical; is, that whether the is fixed (e.g.,- price among competitors Potteries, United States v. 273 at Trenton U.S. or businesses 392) supra, different economic levels Dr. Miles Medical Co. v. Park & Sons Co. (e.g., 502, 220 U.S. 373 L.Ed. 31 claim S.Ct. Defendants’ that (1911) 376]). [55 nor neither California law federal between law prohibits price-fixing is without law merit. federal in this is clearly noncompetitors regard Miles, too well established to extensive discussion. Dr. (See, require e.g., 982, v. Int’l Parts 392 134 U.S. L.Ed.2d (1968) Perma Corp. [20 Mufflers 88 S.Ct. 1981]; Albrecht v. 390 Herald Co. U.S. 145 L.Ed.2d (1968) [19 998, Indeed, term, 88 S.Ct. at its last Court 869].)9 Supreme reaffirmed this to the rule of in a case reason principle. Though reverting V, vertical restrictions Inc. v. GTE (Continental T. involving geographic Inc. 568, 433 U.S. 36 the court Sylvania (1977) 2549]) L.Ed.2d 97 S.Ct. [53 observed that It was concerned there pointedly only nonprice vertical restrictions and that the se has restrictions “per illegality price 51, at fn. (Id. . . .” been established . p. firmly many years [53 above, L.Ed.2d at As noted federal cases 581].) p. interpreting Act are Sherman Act. Section construing applicable Cartwright 16720 refers to a combination of “two or more fix persons” prices, is not limited to its combinations language among competitors.

It is clear the literal of the terms that defendants could—and in fact did—fix the at which price sold That this constituted “acts two or more gasoline. 1184, defendants, (3d 1976) 9Evans v. Cir. 544 F.2d relied S. S. Co. Kresge upon Act, se states in order to constitute violation Sherman the combination per Nevertheless, must be between that vertical restraints alleged competitors. recognizes 1192.) (Fn. resale are to be maintenance at imposed by price presumed illegal. p. fix or of a within establish commodity meaning

persons” clear.10 of section subdivision also seems (d), amount between the parties Admittedly, arrangements levels business different the usual vertical whereby entities, as of one another insofar profits completely independent will be concerned, maintain losses are goods agree at which Here, to set the resold.11 defendants’ would for a gúarantee given exchange have sales. This could realize a 7 guarantee *11 percent profit gasoline relations with of into defendants’ some element risk-sharing injected were some be theorized that conducting type might plaintiffs plaintiffs; the for of and that of with defendants the sale gasoline joint enterprise to not intended in section was prohibition against price-fixing a such situation. apply

However, the risk of losses it is clear that defendants did not assume Their on sales to substantial extent. gasoline any each of Powerine for a rebate on gasoline purchased by gallon plaintiffs obtain funds from which the from Powerine was to admittedly designed Thus, be defendants to would attempt guaranteed paid. plaintiffs profits for as utilize to to guaranteed profit justification plaintiffs payments while at could sell set the the to gasoline, plaintiffs price from to the the guaranteed profit plaintiffs money pay obtaining of a on the themselves in form they purchased markup gasoline Since of economic This is an model Powerine. bootstrapping. ingenious amount deemed advanta- at defendants could any they markup set. in the assure that own could from their always they viewpoint, geous than as much or more would them rebates run long pay plaintiffs were out as defendants guaranteed profits.12 pay required acts to fix 10We assertion that there no “combination” of prices defendants’ reject The fact that they had about the at say prices because plaintiffs nothing pump. is the combination defendants sufficient establish abide set agreed by by price Parke, 29, 45, (1960) fn. 362 U.S. (United v. Davis & Co. section 16720. States required by 6 L.Ed.2d Moreover, 505, 515-516, fact that defendants set the 503].) prices 80 S.Ct. [4 because, above, the reasonableness is defense as out at a rate not a pointed competitive its scheme does not vitiate to an illegal price-fixing established price pursuant illegality. found, on sufficient since the trial court combination 11Nor was there horizontal evidence, with one nor were in competition that neither plaintiffs, another. certain, their control of selling purchase price could make 12Defendants as since sums profits, would not be required pay any guaranteed that they gasoline, earned a 7 a level to assure percent profit could set those prices plaintiffs Thus, defendants to set the at which provision allowing price was sold at the Palmdale store could not be on the basis justified of the guaranteed profit. between Powerine and defendants also constitutes a

violation of section 16720 in that it was a combination to “increase the of merchandise . . .” in price violation of subdivision (b) section 16720.13We are not defendants’ contention that persuaded by Powerine the market actually paid

additional or 4 cents a cost, added to its which Powerine gallon paid defendants, over to was not but a part plaintiffs’ purchase price them in return for the markup paid by guaranteed profit. concerned,

Insofar as were the full amount paying billed Powerine for Powerine billed without gasoline. that the cost was than the wholesale market indicating higher and that the amount in excess of that was a markup paid *12 Powerine to defendants. by

Moreover, unaware were to the plaintiffs prior signing that would be agreement to more than the they market required pay for The trial court’s price gasoline. are not contrary findings supported the seen, evidence. As we have the court by found that knew plaintiffs when the franchise that the they to set signed agreement “right gas retained defendants in included the to set prices” by 5(d) paragraph the at which from Powerine and price plaintiffs bought gasoline they would be to a which would be collected required pay markup by Powerine as for defendants. allows defendants to agent 5(d) Paragraph set the “sold the leased it makes no gasoline through” premises; reference to for sale. gasoline plaintiffs purchased evidence on the only subject plaintiffs’ knowledge prior the was that one of the defendants told signing agreement testimony Mailand that he would 25.6 or 25.8 cents for but pay gallon gasoline, much, that, sales. Defendants admit as for state had although they they to assure that would earn no more than a of 7 power plaintiffs gross profit percent “instead let make an extra [plaintiffs] 3%.” we note the fact that Powerine did not 13Once again participate setting which it sold does not establish there was no “combination of. . . plaintiffs acts two or more to increase the Powerine’s to follow persons” price. agreement directions is sufficient to constitute a defendants’ violation of this prohibition. this was more or less than wholesale state whether not price. Mailand, at the of the conversation and who sheriff time deputy business, testified that he did not know the in the oil experienced was in effect some after the wholesale For months price. much it was tried to discover from Powerine how Mailand unsuccessfully informed other its gasoline. being charging purchasers Upon of the defendants Mailand to Powerine of Mailand’s one told inquiries Powerine, to tell him cease and that Powerine was not required annoying the wholesale price. circumstances,

In we avoid the conclusion that Powerine these cannot would and defendants entered into an arrangement whereby excess over would increase the pay rebate, a clear violation to defendants as an undisclosed market price 16720.14 subdivision section (b) above, cited between

Under authorities Powerine were unlawful and defendants and between defendants and is, therefore, not whether these se. It necessary inquire arrange- per effect.15 had an actual ments anticompetitive come, that, then, court’s even if a We trial determination established, in 16720 was violation of section “truly thereof, and benefits in the conduct and volved” reaped illegal the doctrine of in delicto. barred are pari recovering by *13 134, Justice 392 U.S. v. Int’l In Parts Perma Corp., supra, Mufflers in the the in delicto doctrine Black discussed the application pari 748, Tree, 1973) (E.D.Pa. relied Plum Inc. 361 F.Supp. upon by v. 14Seligson There, defendants, at a discount from goods is a franchisor purchased distinguishable. was The court found that there no sold them at a to its franchisees. markup and suppliers as wholesaler and because franchisor acted merely the Sherman Act violation of Defendants claim that if a on the sold to the franchisee. goods took wholesaler’s markup and it to the situation from Powerine resold plaintiffs, had they would purchased case and and difference between that identical the only be to Seligson, However, for defendants. here is Powerine did the bookkeeping what and the as to was no between the franchiser supplier there agreement Seligson it was secret. Here there was such an and agreement, should be the franchisee. charged to set the at Nor a franchisor allowing was there provision Seligson ' from the franchisor. which the franchisee sold the be goods purchased 15Thus, at which the fact that defendants set is not Under the franchise the level of competitors important. plaintiffs’ approximately wished, could, if have had absolute to fix the power price, they they agreement, they market or lower than it higher price. pegged There, Midas, Inc., context of antitrust violations. a owned wholly a mufflers, sales, of manufacturer of automobile entered into a subsidiary with a chain of dealers the dealers to all agreement obligating purchase their mufflers from the to sell the at a fixed mufflers subsidiary, price, and to refrain from with Midas’ was dealing competitors. cancelable either on 30 notice. It was held that the dealers by party days’ were not barred from various of the sales challenging provisions as restraints of trade on the were illegal ground delicto with Midas. pari

The court reasoned that whether or not involvement “truly complete in a basis, scheme could ever be a participation monopolistic wholly delicto, from the idea of in for apart cause of pari barring action,” such involvement was not shown. the dealers had Although made had franchises, additional large profits, eagerly sought acquire and were aware of the restrictions fully was held they challenged, nevertheless that the scheme was thrust them Midas. The illegal upon court out that the dealers seek each pointed clause of the actively interests, detrimental to their agreement, many provisions the restraints because their accepted only acquiescence necessary obtain an otherwise attractive business opportunity.16

Cases have Perma declared that if a does not subsequent plaintiff scheme, bear or if he is equal responsibility establishing illegal economic such an he compelled pressures accept agreement, cannot be barred from because he therein. (See recovering participated Columbia v. Cir. (4th 1971) Nitrogen Corporation Royster Company 15-16; 3, F.2d Premier Electrical Construction Co. v. Miller-Davis Co. Cir. F.2d (7th 1970) 1138.)

We hold that under these are not barred from principles plaintiffs sales, recovering. Although they sought guaranteed profit the device of this means of achieving goal by illegal allowing *14 defendants to set the sale was defendants’ invention. Moreover, neither in nor had participated any knowledge Black, court, 16Justice for the states that “the writing doctrine of in delicto ... is pari not to be as a recognized (392 defense to an antitrust action.” U.S. at 140 L.Ed.2d p. [20 However, 991].) a of the p. in this majority justices join sweeping proposition. White, Marshall, Justices Portas and in and Justices Harlan and concurring opinions, Stewart, in a all concurring that the defense of dissenting opinion, appeared agree is delicto in an antitrust if pari action are in appropriate fault with parties equal one another. before Powerine and defendants between the secret rebate into the entered agreement.17 Plaintiffs also assert that the franchise agree provision unlawful ment them to from Powerine is requiring purchase per se as an tie-in contract. As described in Corwin v. Los illegal Bureau, 856-857 Service Inc. Cal.3d (1971) Angeles Newspaper [94 785, 484 P.2d the definition and effect of such a contract is 953], Cal.Rptr. “ ‘an a to sell one but the condition agreement by party product only that the also a different or at least (or tied) buyer purchases product, from other that he will not that supplier----(cid:127) any agrees product purchase on the Where exacted such conditions are successfully competition merits with to the tied is curbed. Indeed respéct product inevitably serve “tying agreements hardly any purpose beyond suppression . . . free the market for access to competition.” They deny competitors the tied not because party tying requirements product, imposing a a lower but because of his has better or product power leverage in another market. At the same time are forced to their forego buyers between . . . are free choice competing products.’ Tying arrangements ‘whenever a has sufficient economic se party power illegal per restrain free to the appreciably competition respect tying product the market for the tied product....’” or tend to

Tie-in lessen agreements “substantially competition are under 16727.18 create a section illegal monopoly” lease, Plaintiffs claim that from defendants the they purchased to use defendants’ business and the trade name “Green system, that the ties these Pastures Dairy,” agreement illegally from to the purchase gasoline requirement purchases was not tied to the The trial court found that this Powerine. requirement above, are barred the trial court’s findings set forth 17For the reasons hands, not be waiver and may the doctrines of unclean estoppel under recovery in the asserted were based plaintiffs’ participation These conclusions upon upheld. scheme. price-fixing make a sale “It shall be unlawful for to lease or any 18Section provides: person merchandise, or contract for the sale of commodities for use machinery, goods, supplies, State, therefor, from, within the or to fix a or discount or rebate such charged upon, condition, that the lessee or on the or thereof understanding purchaser price, merchandise, commodities, deal in the shall not use or or goods, machinery, supplies, seller, services or of the lessor or where the effect of such competitor competitors lease, sale, condition, or contract for sale or such or be to understanding may lessen or tend to create line of trade or any substantially competition monopoly of the State.” commerce in section any *15 name defendants’ Pastures trade or the Green lease, use the right economic did not sufficient that defendants have business power system, the in restrain these matters to appreciably competition respect that and or other market for requirement product, any of a continuous reasonable to assure was supply upon plaintiffs imposed gasoline. high-grade or not the

Whether purchase requiring plaintiffs provision it is an all for a tie-in Powerine meets arrangement, requirements devised defen- scheme by part illegal price-fixing indispensable it in doubt viewed as essential Their leaves no that dants. testimony they In of the order to rebates for payment guaranteed profits. provide circumstances, falls with the scheme these the restriction price-fixing must held invalid.19 be

Thus, reversed.20 In view of our the trial court’s must be judgment action, first cause of it is conclusion that must in their plaintiffs prevail violated other not decide whether defendants also necessary provi- law, as in the second cause of action. Plaintiffs sions of alleged sought action, that fraud in their third cause of for alleging damages exemplary stated, and their actions that defendants by implied” “expressly The trial court from Powerine at market were price. purchasing evidence. were found that these not allegations supported that was because the Plaintiffs assert this incorrect provisions finding this that the franchise agreement royalties setting percent implied fact was amount whereas in the total received from royalties plaintiffs, form were defendants additional royalties receiving an While have found such of secret rebates. the trial court might do from the franchise it did not so factually implication agreement, we hold that a as a matter of law. cannot such finding compelled n Powerine, did 19Plaintiffs not seek to substitute another as were supplier they However, entitled to do under the defendants agreement provided gave permission. it is that defendants an clear viewed the rebate as of the indispensable part and that a refused to to substitute who accede to a rebate agreement, permission supplier would have been refused. defendants, the issue the trial court found for did not make on any 20Since findings It did find that failed because not damages they dámages. mitigate 1969, after that Powerine was terminate the discovered July paying sales, failed to a modification rebates to defendants because accept 1970. Whether these would offered agreement the early findings support Even if such failed to we need decide. mitigate conclusion damages result, since were reduction in the would damages a conclusion justified, only partial relate to the invalid only period during provisions findings portion in effect. *16 384 ’ Appeal

Defendants that, while court’s determination from the trial Defendants appeal to allow in that refused violated the agreement 30, 1970, set after November defendants to the gas prices date, to defendants were that from Powerine subsequent purchase gas such conduct. not damaged by of the franchise 5(d) our determination that

In view of paragraph invalid, follows that did not breach is the conclusion agreement to set the allow defendants by refusing selling price agreement 30, The after November 1970. same reasoning applies gasoline failure that requirement they purchase plaintiffs’ comply from Powerine. the entire franchise We consider defendants’ assertion that must declared void because is invalid. be 5(d) paragraph 16722 violation Section Cartwright provides agreements Act are void. The rule is settled that contracts be partially illegal may if the is from the which is severable legal. upheld part illegal portion 513, 320-321 392 v. Cal.2d (Keene (1964) Harling Cal.Rptr. [38 Here, P.2d 273].) 5(d) provides expressly paragraph is defendants to set the by plaintiffs given on sales. for the Since profit percent exchange guaranteed another, for one these are exchange promises specifically given the franchise without excised from entire be may provision same result obtains with essential The violence to its objects. doing to the purchase gasoline provision requiring plaintiffs respect a result of defendants as The asserted Powerine. damages only did not that defendants of this is breach alleged provision plaintiffs’ view, In our this we held be receive the rebates which have illegal. the essential deleted without also be undermining objects may provision of the agreement. costs are to recover is reversed. Plaintiffs appeal. judgment J., J., Tobriner, J., Manuel,

Bird, concurred. C. *17 Anomalously, theuse the anti- CLARK, J., Dissenting. majority to reduce of the prices provisions Cartwright Act—designed price-fixing of trade—to invalidate contractual and to eliminate restraint provisions retailers. and to with other reduce foster competition designed prices sell evidence establishes the would enterprise undisputed that when took over the at or below its prices competitors; to assure its would be contract were adopted prices enterprise, provisions even at or below maintained during price any competitor 1 wars; retail cent below lowest in fact set the that defendants that after breached the by any competitor; price charged those of some raised the above competitors. agreement, they prices not violated the defendants have The trial court concluded properly Where, here, and the risk as Act. both profit Cartwright an are shared loss from retail sales by noncompeting parties, does not constitute a se between them to be regarding price charged per the rule violation of antitrust of reason is Rather, regulations. applicable. was Because the business relation intended challenged promote fact, and neither in had stifled nor competition competition any tendency so, to do did not violate the While act. defendants’ price agreement tort, secret have or a commission constituted breach of contract may did not alone stifle within the act. Viewed or competition meaning with the the commission does not conjunction price agreement, warrant an award of treble damage. Enterprise

Joint entities held a two business has been se Although fixing by per violation of antitrust there are v. (Battle regulations, exceptions. Liberty 39; Cir. F.2d 1974) National Insurance (5th Congoleum Company Life Industries, v. (E.D.Pa. 1973) Inc. Cork Armstrong Company F.Supp. when the entities are 334.) affd. 510 F.2d One such exists exception sale of but act as a in the joint truly independent enterprise product. v. S. Co. Cir. (3d Evans S.

Such a situation Kresge presented den., 1184, 1186-1187, 433 U.S. 908 L.Ed.2d 1092, cert. 1976) 544 F.2d [53 where two used same 2903], 97 S.Ct. business entities independent roof. A small name the same under by percentage products other, the same each each was also sold agreeing charge prices concluded both. The court for the items carried establishing prices federal antitrust laws.1 not violate entities, that the two

The court in reasoned independent Kresge antitrust be viewed as for the most purposés, may partners purpose addition, the extent that offered “In analysis. Kresge Hempfield establishments, one’ with other like for sale and ‘as products competed under acted as two joint *18 ‘partners’ establishing operating v. S. S. and (Evans Kresge, supra, merchandising pricing policies.” 1184, court stated that a means for F.2d The 1191-1192.) determining of a “. . . for which is to be designed only operation charged price said vis-a-vis others—cannot be unified more efficient entity competitive v. S. S. or (Evans to either Kresge, ‘destroy’ competition.” ‘suppress’ 544 F.2d 1196.) supra, case, were in effect and defendants the instant

In engaged plaintiffs for a return on relied retail sale of Both gasoline upon joint enterprise. and investment, of loss. real and both shared the risk their Owning were to be and defendants compensated goodwill, property personal sales, retail with a rental and royalty gross through percent from Powerine were also minimum. Defendants’ commissions guaranteed Defendants’ rental from the volume of sales. dependent upon plaintiffs’ the franchise were and their real royalty personal property If were established related to the retail sales directly by plaintiffs. prices retailers, that could not with other defendants so high plaintiffs compete Remember, would suffer with obviously along plaintiffs. plaintiffs’ low. was that too complaint prices-were

Further, but defendants not shared losses only plaintiffs’ potential a 7 increased their own risk of loss also by guaranteeing percent fixed sales. If the retail very gross profit volume, rental, would defendants as to increase thus low so increasing on their suffer losses large guarantee. do, did not conclude, that defendants as the

It is unrealistic majority extent.” substantial of losses on sales assume “the risk any risk of the took the profit Defendants 378.) guaranteed (Ante, only p. interests their substantial the risk that but also royalty property method of or no return. The realize little sharing would complex were that defendants of the business establishes and losses directly profits the act. that federal are in construing precedents applicable 1The recognize majority 376.) (Ante, p. with venture’s success and involved in the .were engaged they other retailers. with in joint enterprise competing run” would The tell us that in the the rebates “long pay majority out as as much or more than pay required are filled However, courts (Ante, 378.) profits. bankruptcy guaranteed p. in the whose have become debtors businesses “long might profitable run,” sides in the become in the shorter run. Both but somehow insolvent were driven out of instant case evidence competitors presented which, survived the business had wars—businesses wars, know whether have succeeded run.” We do not in the “long might $20,000 under have received would survived absent have become do we when defendants would nor know guarantee, insolvent war had continued. viewed *19 provisions guaranteeing profits establishing prices the caused to assume

either alone or with rental defendants provision, The much of the and loss risk of the joint enterprise. profit to, of, a and had the effect was joint creating designed provision Like with wars. the others competition during price enterprise permitting association, be either Evans the “cannot said to arrangement ‘suppress’ or ‘destroy’ competition.”

The concede that no horizontal combination restricting majority existed. fn. also the 11.) (Ante, They recognize competition p. the did not the of vertical between constitute relationship parties type which has been found se the courts the illegal per The reveals the (Ante, 378.) record enterprise past. p. clearly joint with other and was not an retailers designed successfully compete to restrict or restrain the market attempt place.

Commission The violate commissions defendants do not the paid by Act. were not in Cartwright Again, plain- competition than tiffs. Those commissions were no more restraint of trade any commission a or to its salesman. manufacturer wholesaler paid Indeed, the commission discussion casts doubt on validity majority’s of millions of salesman commission contracts in this state. have been

While commission with Powerine may “secret,” restrain in the market can be said to trade hardly place. secrecy of an or facilitate efficacy practice restraining

Secrecy may nature—which determines trade, its covert but is practice—not commissions in the instant case restraint exists. While secret whether tort, contract or for do not rise to an action for breach of may give Act, of the a restraint of trade violative constitute Cartwright warranting treble damages.2

Conclusion Act are intended to Cartwright anti-price-fixing provisions trade It is obvious neither restraints on hindering prevent competition. trade, defendants intended to restrain nor competi- impair Rather, the clear market conditions. tion or to alter purpose existing for the leased was to establish a means of payment price provisions franchise, These and the provisions guaranteed profit. premises, at all with other retailers but allowed compete required only remorse, Plaintiffs, times, wars. suffering buyer’s including price perhaps on the basis of to avoid their not now be should obligations permitted which was furthered—not agreement. violated—by public policy reward. be allowed Much less should triple Richardson, J., concurred. *20 for a of the cross-defendants appellants rehearing petition Richardson, Clark, J., J., were of the

denied March 1978. opinion that the should be petition granted. discuss for breach contract or fraud. recovery 2The do not potential majority $19,000 $20,000 from Powerine settlement and over have recovered Plaintiffs already addition, the trial court found that after discovered the In profits. guaranteed clear It is no means damages. failed mitigate

rebates July an treble recovered absent award of damages. recover more than already could