offered BMA a discount of 16% on all products, plus an additional percentage discount on two other products. Lee further informed Hartmann that Owens-Corning would lose business at BMA unless Owens-Corning met CertainTeed's discount. On April 16, 1979, Owens-Corning approved a request to continue BMA's 13% discount. On May 25, 1979, Hartmann partially met CertainTeed's reported offer by increasing BMA's discount to 15%, retroactive to May 1, 1979. On June 20, 1979, Owens-Corning increased BMA's discount to 16%. About July 1, 1980, Lee told Hartmann that Owens-Corning's price was still higher than CertainTeed's and unless Owens-Corning lowered its prices, BMA would purchase a greater share of insulation from CertainTeed. On August 5, 1980, Owens-Corning gave BMA an additional discount of $ 150.00 per truckload of merchandise. Owens-Corning contends that these facts support summary judgment in its favor. Reserve, however, argues that the record establishes that Owens-Corning had no basis to offer increased discounts to BMA.
The Supreme Court established five factors that are probative of a seller's good faith: (1) evidence that a seller had received reports of similar discounts from other customers; (2) evidence that a seller was threatened with a termination of purchases if the discounts were not met; (3) documentary evidence; (4) an appraisal of the reasonableness of a reported discount in terms of available market data; and (5) the seller's past experience with the buyer. United States Gypsum, 438 U.S. at 455. Good faith, however, is a flexible concept and accordingly, is "fact specific." Id. at 454-55. The facts support the proposition that BMA threatened a termination of purchases if Owens-Corning did not lower its prices. In April of 1979, Lee of BMA telephoned Hartmann, telling Hartmann that Owens-Corning would lose business unless Owens-Corning met CertainTeed's reported discounts to BMA. Lee repeated this tactic on July 1, 1980, informing Owens-Corning that its prices were still higher than CertainTeed's, and that BMA would purchase a greater share of products from CertainTeed unless Owens-Corning again lowered its prices. Reserve attempts to cast doubt on the existence of any threatened terminations by citing various assurances made by BMA to Owens-Corning that Owens-Corning would not lose business to CertainTeed. Reserve's objections are not persuasive, however, because BMA's assurances came after, not before, Owens-Corning increased its discount from 13% to 16%.
Moreover, the record shows that Owens-Corning appraised the reasonableness of CertainTeed's reported price in terms of available market data. Owens-Corning concedes that it did not conform to its "Special Approved Report" (infra, p. 17) procedure, which Owens-Corning usually requires of its sales representatives to document the specifics of a competitive discount. Citing United States Gypsum, Reserve asserts Owens-Corning's failure to document its efforts as evidence of its bad faith. Reserve, however, ignores United States Gypsum's language. The Court called for "efforts to corroborate the reported discount by seeking documentary evidence or by appraising its reasonableness in terms of available market data. . . ." 438 U.S. at 455 (emphasis supplied). Hartmann of Owens-Corning attested that it was his routine and practice to evaluate prices in light of recently reported competitive discounts and satisfy himself that the reported discount existed and that Owens-Corning's offer was no more than necessary to either retain, or obtain, business.
Reserve objects, however, that Owens-Corning's and CertainTeed's discount of 16% to BMA established a new national low, and that Owens-Corning was the first to sell at this new low when its 16% discount became effective on August 1, 1979. That does not, however, impeach Owens-Corning's defense "since good faith, rather than absolute certainty, is the touchstone of the meeting-competition defense, a seller can assert the defense even if it has unknowingly made a bid that in fact not only met but beat his competition." Great Atlantic & Pacific Tea Co. v. Federal Trade Commission, 440 U.S. 69, 83, 59 L. Ed. 2d 153 , 99 S. Ct. 925 (1979). Reserve also asserts that Owens-Corning acted in bad faith by offering BMA a discount of 16%, when Owens-Corning knew that it could compete with CertainTeed at 15%. Reserve points out that at first Owens-Corning only partially met CertainTeed's reported offer, before increasing it to 16%, 26 days later, without further negotiations. Reserve compares this discount in response to CertainTeed's discount, to earlier in 1979, when Owens-Corning granted BMA only a discount of 13% in response to a reported 16% discount from competitor Johns-Manville.
Manufacturers react to different competitors in different ways. Hartmann testified that he did not believe that Owens-Corning's business with BMA was assured. Hartmann was aware that CertainTeed attempted to sell BMA insulation at various times during the 1970's. Owens-Corning was also aware that BMA expressed dissatisfaction with the amount of insulation allocated to it during a period of restricted production in 1977-78. Furthermore, Owens-Corning believed that BMA covered its needs during this period with purchases from CertainTeed, and that BMA was considering an additional source of supply to protect itself. (Hartmann Affidavit, para. 36.) In fact, Hartmann received no assurances from BMA that it would not further shift purchases until after Owens-Corning increased BMA's discount to 16%. Therefore, in light of Owens-Corning's experience with BMA, Owens-Corning's appraisal of and response to BMA's threat of termination of purchases was reasonable. Hartmann, who dealt personally with Lee since 1976, attested to Lee's trustworthiness and the respect Lee enjoyed within the industry. Moreover, BMA was a long-term customer of Owens-Corning with 1978 purchases exceeding $ 9,000,000. Owens-Corning did not casually rely upon "uncorroborated reports." United States Gypsum, 438 U.S. at 453. Rather, "the source of information was a person whose reliability was not questioned and who had personal knowledge of the competing bid." Great Atlantic & Pacific Tea Co., 440 U.S. at 84.
In a last effort, Reserve argues in a conclusory fashion that Owens-Corning knew or should have known that CertainTeed's price to BMA was illegal, and that Owens-Corning could not in good faith meet an illegal price. This argument is identical to the one summarily rejected by Judge Duff with regard to CertainTeed's motion for summary judgment as to this count. Reserve Supply Corporation, 639 F. Supp. at 1467. The record demonstrates that Owens-Corning had a legitimate basis for its good faith belief. Price disparities may exist for lawful reasons. See 15 U.S.C. § 13(a). Reserve simply fails to present any evidence which creates a genuine issue of material fact with respect to BMA.
2. Owens-Corning's Competitive Pricing Procedure
Owens-Corning's regular practice required its sales representatives to complete "Special Approved Requests" ("SAR's") when deciding whether to partially or wholly meet a reported competitive offer. SAR's document information about the identities of customers and competitors, competitive prices reported by a customer, and prices requested for approval by Owens-Corning sales representatives. If a sales representative recommended meeting a price, the representative forwarded a completed SAR to Owens-Corning's Toledo headquarters, where RIDMD personnel could assess the reported competitive offer's credibility. If necessary, RIDMD sought further information from a customer. Owens-Corning asserts that RIDMD only met competitive offers to the extent necessary to retain or to secure business. Furthermore, Owens-Corning periodically reverified that competitors continued to offer the prices that Owens-Corning had elected to meet. Owens-Corning argues that its SAR procedure, was therefore sufficient to comply with section 2(b) requirements as to the remaining eight competing distributors. The remaining eight distributors are ACE, American Hardware, Central B, Chatham Supply, Cotter, Hardware Wholesalers, Inc.("HWI"), Rou Products, and Rounds & Porter.
Reserve contends that, on the whole, Owens-Corning's SAR procedures are inadequate to raise a section 2(b) "meeting competition" defense. Reserve again argues that Owens-Corning should have requested documentation to further confirm reported competitive offers. As the court noted earlier, however, a purported lack of documentation, without more, will not necessarily destroy a good faith defense. Owens-Corning's SAR procedure is almost identical to CertainTeed's "Reports of Competition" system, which Judge Duff found sufficient to establish a good faith defense that discounts were offered to meet, but not beat, competition. Reserve Supply, 639 F. Supp. at 1465; see also William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 668 F.2d 1014, 1046-47 (9th Cir. 1981). Owens-Corning's procedures are no less sufficient.
Reserve attempts to rebut the sufficiency of the SAR process with respect to two specific accounts. First, Reserve generally alleges that Owens-Corning beat competition for Rounds & Porter purchases. Reserve does not challenge Owens-Corning testimony establishing that Owens-Corning believed that it only met, and did not beat, that competitor's reported price. (Ritchie Deposition, p. 81.) Pointing to a rejected SAR regarding a reported competitive offer to HWI, Reserve also contends that Owens-Corning knew that HWI reported inaccurate information. The evidence demonstrates, however, that Owens-Corning automatically rejected this SAR because it lacked required information, not because it contained false information. (Ritchie Deposition, pp. 200-02.) In addition, Reserve asserts that Owens-Corning labeled one HWI source of information as a "questionable source." This HWI employee allegedly reported to Owens-Corning that Johns-Manville lost money on its insulation operations in 1981. This reference, at best, however, is ambiguous. The label could just as easily suggest that the HWI employee was a questionable source of information regarding Johns-Manville's profitability, but not Johns-Manville's pricing, which a HWI employee would have more opportunity to know. One ambiguous reference cannot destroy the sufficiency of the entire SAR process.
A successful "meeting competition" defense exonerates a seller from Robinson-Patman liability. Falls City, 460 U.S. at 438. The record establishes tl3 / d fact exists as to Owens-Corning's good faith belief that it met, but did not beat, competition. Therefore, the Court grants Owens-Corning's motion for summary judgment on Count II.
The court grants CertainTeed's and Owens-Corning's motion for summary judgment as to Counts I and III. The court also grants Owens-Corning's motion for summary judgment as to Count II.