Falls City Industries, Inc. v. Vanco Beverage, Inc.

PETITIONER: Falls City Industries, Inc.
RESPONDENT: Vanco Beverage, Inc.
LOCATION: Family Court of Ulster County

DOCKET NO.: 81-1271
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 460 US 428 (1983)
ARGUED: Oct 13, 1982
DECIDED: Mar 22, 1983

ADVOCATES:
Howard Adler, Jr. - Argued the cause for the petitioner
John T. Cusack - Argued the cause for the respondent
Stephen M. Shapiro - Argued the cause for the United States as amicus curiae urging reversal

Facts of the case

From 1972 through 1978, Falls City Industries, Inc. sold beer to Vanco Beverage, Inc., the sole wholesale distributor for Falls City in Indiana at a higher price than Falls City charged its only wholesale distributor in Kentucky. Under Indiana law, brewers were required to sell to all Indiana wholesalers at a single price, Indiana wholesalers were prohibited from selling to out-of-state retailers, and Indiana retailers were not permitted to purchase beer from out-of-state wholesalers. Vanco filed suit, alleging that Falls City's price discrimination violated section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act. The Federal Court found that Vanco had established a prima facie case of price discrimination. The court rejected Falls City's "meeting-competition" defense under section 2(b) of the Clayton Act, which provides that a defendant may rebut a prima facie showing of illegal price discrimination by establishing that its lower price to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor. The Court of Appeals affirmed.

Question

Is the meeting-competition defense of section 2(b) of the Clayton Act available only if the defendant sets its lower price on customer-by-customer basis and creates the price discrimination by lowering rather than by raising prices?

Media for Falls City Industries, Inc. v. Vanco Beverage, Inc.

Audio Transcription for Oral Argument - October 13, 1982 in Falls City Industries, Inc. v. Vanco Beverage, Inc.

Audio Transcription for Opinion Announcement - March 22, 1983 in Falls City Industries, Inc. v. Vanco Beverage, Inc.

Warren E. Burger:

The judgment and opinion of the Court in Falls City Industries against Vanco Beverage will be announced by Justice Blackmun.

Harry A. Blackmun:

Well, this case comes to us by way of certiorari to the -- to the United States Court of Appeals for the Seventh Circuit.

It's an antitrust case that centers in Section 2(a) of the Clayton Act as amended by the Robinson-Patman Act.

The case doesn't lend itself very well to description from the bench.

I think it suffices to say that the petitioner is a Louisville Kentucky brewer which sold its beer to the respondent, the sole wholesale distributor for petitioner's beer in Evansville and Vanderburgh County, Indiana, at a higher price than the petitioner charged its only distributor in Henderson County, Kentucky, just across the Ohio River.

Under Indiana law, brewers were required to sell to all Indiana wholesalers at the same price and wholesalers were prohibited from selling to out-of-state retailers and retailers could not purchase beer from out-of-state wholesalers.

The respondent distributor sued the brewer, alleging price discrimination that violated the Act and the trial court held that the distributor had established a prima facia case.

That court rejected the brewer's defense that it was merely meeting competition in Kentucky and hence was immune from liability and the Court of Appeals affirmed.

In an opinion filed with the clerk today, we reverse that judgment and remand the case for further proceedings.

We do hold that competitive injury was shown.

The defense of meeting competition, however, is not defeated on the theory that the price difference resulted from increases in Indiana rather than decreases in Kentucky.

The standard governing the requirement of a good faith response is the standard of prudent businessman, responding fairly to what he reasonably believes is a situation of competitive necessity.

The trial court did not address the crucial question whether the Kentucky prices remained lower than the Indiana prices in response to competitor's prices in Kentucky.

And for that reason we reverse and remand.

The decision is by unanimous court.

Warren E. Burger:

Thank you Justice Blackmun.