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CENTRAL ICE CREAM CO. v. GOLDEN ROD ICE CREAM CO.

June 16, 1960

CENTRAL ICE CREAM COMPANY, AN ILLINOIS CORPORATION, PLAINTIFF,
v.
GOLDEN ROD ICE CREAM COMPANY, AN ILLINOIS CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Campbell, Chief Judge.

Plaintiff, Central Ice Cream Company, an Illinois corporation, brought this action for injunctive relief and damages against Golden Rod Ice Cream Company, an Illinois corporation, alleging conduct by defendant in violation of the Sherman Anti-Trust Act, Title 15 U.S.C.A. § 1, the Clayton Act, Title 15 U.S.C.A. § 13, the Robinson-Patman Act, Title 15 U.S.C.A. §§ 13a and 13b, the Civil Rights Act, Title 42 U.S.C.A. § 1985(3) and the National School Lunch Act, Title 42 U.S.C.A. § 1753. Plaintiff has since expressly disclaimed any reliance upon all except one of the above statutes and the case now comes on for disposition upon a Stipulation of Facts and the exhibits and briefs of the parties, plaintiff resting its claim for relief exclusively upon Section 2 of the Clayton Act as amended by Section 1 of the Robinson-Patman Act, Title 15 U.S.C.A. § 13(a-f).

Plaintiff maintains an ice cream manufacturing plant and garage in Chicago, Illinois, a distribution plant and garage in Joliet, Illinois, and has a fleet of approximately thirty trucks and other items of equipment all of which are used in its business of manufacturing and selling ice cream in Indiana and Illinois. During the calendar year 1955 plaintiff sold 99.975% of its ice cream to retailers in Illinois and .025% to retailers in Indiana.

During the year 1955, with which we are concerned here, milk received in the Chicago milk marketing area from Illinois and Wisconsin totaled 4,403,121,129 pounds. The said milk averaged 3.60 pounds of butterfat per hundred pounds of milk and thus contained 158,512,385 pounds of butterfat. The total pounds of butterfat used by ice cream manufacturers in 1955 was 9,594,483 pounds or 6.052% of the total butterfat received in the Chicago milk marketing area in 1955. Plaintiff used 0.322% of the butterfat reaching the Chicago milk marketing area in 1955 and used 5.318% of the total butterfat used in the production of ice cream by all ice cream handlers in the Chicago marketing area in 1955.

Defendant maintains an ice cream manufacturing plant in Chicago, Illinois, and sells and delivers ice cream, sherberts and other frozen desserts solely within the State of Illinois. In 1955, defendant used 0.452% of the butterfat reaching the Chicago milk marketing area from Illinois and Wisconsin and 7.468% of the total butterfat used in the production of ice cream by all ice cream handlers in the Chicago marketing area.

Defendant, among other customers, sells and delivers ice cream to Fred Harvey, a New Jersey corporation, all sales and deliveries taking place in Chicago. These sales and deliveries are made at the Union Station and Polk Street Station for consumption and sale only in the restaurants or lunch rooms operated by Fred Harvey in these railroad depots. Sales and deliveries of ice cream by defendant have also been made to two other Fred Harvey restaurants, located at 919 North Michigan Avenue, Chicago, and 308 South Michigan Avenue, Chicago, for sale and consumption in said restaurants. A small portion of total sales by defendant to Fred Harvey is delivered to the Fred Harvey Commissary, 2014 South Wentworth Avenue, Chicago. This ice cream is subsequently resold by Fred Harvey to the Atchison, Topeka & Santa Fe Railroad Company and used in the dining cars of that railroad company traveling between Chicago and the Pacific Coast. Defendant has had no dealings, contractual or otherwise, with the railroad company with respect to the sale of ice cream and has not exercised any control or domination over the use or disposition of such ice cream by Fred Harvey subsequent to its sale and delivery to Fred Harvey in Chicago. None of the ice cream sold to Fred Harvey by the defendant is of the same or like grade and quality sold by defendant to any other customer, but is made to Fred Harvey's special formula and is richer in butterfat. Defendant's deliveries to the Fred Harvey Commissary in 1955 comprised 0.095% of the total butterfat allocated to ice cream manufacturers and 0.005% of total butterfat reaching the Chicago milk marketing area.

For many years prior to November 5, 1955, defendant had sold and supplied ice cream to public authorities and agencies in Illinois, one of which was the Board of Education of the City of Chicago, which purchased the products for re-sale to school children. In 1955 plaintiff intended to submit a bid to the Board of Education of the City of Chicago for the sale of ice cream for its school lunch program. On November 3, 1955, the following conversation took place between Philip Sang, then defendant's Vice-President, and Thomas N. Cummings, plaintiff's Vice-President in 1955:

    "Tom, who was leaving his car there was — after
  some fifteen minutes of conversation, Tom just about
  as he was to take leave of me said, `Phil, how long
  have you served the schools?'
    "I said, `Some twenty odd years, Tom. Why, are you
  thinking about bidding?'

"He said, `I don't know.'

    "I said, `Well, Tom, you know if we lose that
  business we are certainly going to have to make an
  effort to fill the gap.'
    "And with that, Tom took leave and I drove on back
  to the plant."

Subsequently, plaintiff did submit its bid to the Chicago Board of Education and the bid was accepted. In the six or seven weeks following November 4, 1955, the defendant's salesmen called on plaintiff's customers in the Chicago area within the State of Illinois, and not elsewhere, soliciting their ice cream business, and in many instances made loans of money to said customers by way of advanced discounts in order to procure their business. Such loans were represented by customers' notes payable to defendant, and in most instances were to be amortized or repaid out of a special discount, usually at the rate of ten cents per gallon, to be allowed such customers upon their purchases of ice cream from the defendant. Such loans were not uniform in amount, but were based upon the defendant company's estimate of the potential volume of business to be procured from each of said customers. Defendant did not at that time make or offer to make similar advances of money to all of its then customers in the Chicago area, but "such advances or loans were made to meet competition from the plaintiff and other purveyors of ice cream in the Chicago area".

A total of 101 customers of plaintiff, all located within the Chicago area within the State of Illinois, subsequently became customers of defendant. Their names, the advances made by defendant and the security for these advances are recited in Exhibit 1 to the Stipulation. The total of such advances is $13,730.00, plus, in one instance, the loan of two air conditioners to a customer of plaintiff.

In 1955 and presently, approximately twenty-five ice cream manufacturing firms were located in Chicago. Several of these manufacturers are huge companies with plants in many different areas, as for example, Bordens, National Dairy Products and Swift & Company.

Competition for ice cream business in Chicago has been for many years and is now very intense. Retailers with any considerable volume or potential volume of retail sales bargain extensively with manufacturers for financial help in the way of loans or special price concessions. Manufacturers have and do make loans or give special prices or special discounts to retailers to procure or hold their business. All of the larger ice cream manufacturers periodically publish price lists and such published prices are fairly comparable. In 1955 plaintiff had in effect a price list substantially comparable to defendant's published price list. Plaintiff's price list allowed discounts on a quantity basis up to 12¢ per gallon. Defendant's list allowed comparable quantity discounts to a maximum of 8¢ per gallon. Ice cream packed in containers of one-half gallon capacity or less is considered "packaged" goods, as distinguished from "bulk". In 1955, from January until June, plaintiff allowed one food mart operator a discount of 30¢ per gallon from its list, when packed in pint packages, and 32¢ per gallon discount when packed in one-half gallon packages. In addition, plaintiff made loans to such operator in the amount of $25,000 each with respect to two stores, and $15,000 with respect to another store operated by said operator. Plaintiff did not make comparable loans and discounts to all of its customers. In addition, in these cases, it assisted in promotional sales from time to time, under which these food marts were able to buy for limited periods of three to five days ice cream at $1.04 per gallon, as compared with the list price of $1.78 per gallon. With another operator of food marts, plaintiff advanced loans at the rate of $25,000 each for two stores, amortizable over a 24-month period and bearing interest at the rate of one per cent per annum.

Defendant over the years has made many loans to its own customers, retail dealers in ice cream in Chicago, many of which were in the way of advance discounts repayable at 10¢ per gallon on all purchases by such retailers. Defendant has made such loans in order to meet and to attempt to meet competition in the sale of ice cream in Chicago.

It is a uniform practice in the industry in the Chicago area for manufacturers of ice cream to furnish retailers with mechanically refrigerated cabinets for the storage of ice cream in their retail stores. When a retailer changes from one manufacturer and becomes a customer of another, the manufacturer taking over the service removes the original vendor's cabinets and equipment and returns the same to the owner. It has been a general practice in the industry to allow retailers who purchase their own storage cabinets a discount of 10¢ a gallon off the published list prices in consideration of that fact. Both the plaintiff and the defendant have, with other competitors, followed said practice and have felt compelled to do so to meet competition in the area.

During 1955 plaintiff's sales manager had authority to quote any price on bulk ice cream — as distinguished from packaged ice cream — necessary to procure the business. Plaintiff sold bulk ice cream in the summer season of 1955 to Riverview Park at a price of $1.00 per gallon. It sold Northwestern University for a few weeks in 1955 at $1.20 per gallon.

On July 22, 1957, D.C., 153 F. Supp. 684, 686, I dismissed this complaint for failure to state a claim upon which relief may be granted under any of the several statutes set forth in the complaint as originally relied upon. As I then pointed out:

    "The complaint alleges that plaintiff is an ice
  cream manufacturer in Illinois; that it `imports a
  very substantial part of its milk, cream and other
  ingredients from Wisconsin and other states in
  interstate commerce, transforms them into ice cream
  in Illinois and sells this ice cream very extensively
  both in Illinois and in other states'; that defendant
  is engaged in manufacture of ice cream also and
  obtains the raw materials from other states but that
  `so far as the plaintiff is informed the defendant
  makes no sales or deliveries of its ice cream outside
  Illinois'. The gravamen of the complaint is that
  sometime in November, 1955, plaintiff and defendant
  submitted rival bids to the Board of Education of the
  City of Chicago, for the supply of ice cream for use
  in the Board's school lunch program, which is
  subsidized by the Federal Government under the
  National School Lunch Act; that defendant warned
  plaintiff that if it should persist in its bid to
  secure a contract with the Board, defendant would
  make a concentrated effort to deprive plaintiff of
  its customers. The complaint further alleges that the
  contract was awarded to plaintiff and ...

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