MNC showed that DJC slashed its price for publishing trustee sale notices in the City of Los Angeles, where MNC publishes newspapers, while maintaining far higher prices in its newspapers in other cities, such as Oakland, where its costs are substantially lower. (Trustee sale notices are a major source of income to us.)
Two days after a jury brought in a verdict for DJC, Lichtman granted DJC’s motion for nonsuit.
With respect to locality discrimination, he first held that a publication of a notice in one city is not the same “product” as a publication in another city. Phooey. The term “product,” for purposes of the Unfair Practices Act, is defined as to include a “service.” The same service is provided in any city in which a trustee sale notice is published. The notice is run once a week for four weeks; the trustee gets a declaration of publication; the trustee may now hold a foreclosure sale.
Lichtman then proceeded to embrace DJC’s argument that no violation occurred because DJC was not publishing trustee sale notices in Los Angeles below its cost.
While we did have a cause of action for selling below cost, this related to other conduct by DJC: placing notices for customers in newspapers not owned by DJC, through its advertising agency, and charging the customers less than DJC paid the newspapers. In connection with locality discrimination, however, we made no contention that in publishing the notices in Los Angeles for $150, it was losing money. (Prior to its price slashing in 1994, we were charging $283 and DJC was charging $275. We had to lower our own price to $150 in order to compete. DJC has since 1994 raised its prices on subscriptions and just about everything else, but keeps its price for publishing trustee sale notices in Los Angeles frozen at $150, even though the market would bear a price double that. It’s making less money than it could just to minimize a competitor’s profits.)
Exhibit “A,”
below, is Lichtman’s discussion of selling below cost as an element of “locality
discrimination.” The punctuation, indentation, italics, etc. are as they appear
in Lichtman’s July 16, 1999 order.
Exhibit “A”
Assuming arguendo, plaintiff were to prevail on the separate product theory, there still remains another troubling aspect to this claim. Plaintiff must still establish that the lower prices charged by the Daily Journal in Los Angeles were made possible or caused by the charging of higher prices elsewhere. Simply put, this can in no way be shown by the plaintiff. Plaintiff itself introduced undisputed evidence that the Daily Journal’s prices in Los Angeles were above cost and profitable when considered in isolation. There is absolutely no evidence in the record to show that the Daily Journal’s prices in Los Angeles were subsidized by prices elsewhere. Accordingly, the points and authorities raised by the Daily Journal in its trial brief in support of its motion for nonsuit are right on point and are set forth in haec verba herein below:
“California courts repeatedly have indicated that Business & Professions Code §§ 17030 and 17040, which proscribe locality discrimination under California law, closely parallel and are based Upon the same policy considerations as the Robinson-Patman Act’s prohibition of geographic price discrimination. See ABC Int’l Traders Inc. v. Matsushita Electric Corp. of America, 14 Cal.4th 1247, 12581261 (1997) (relying extensively on legislative history and policy of Robinson Patman Act in interpreting Unfair Practices Act); G.H.I.I. v. MTS. Inc..147 Cal.App.3d 256, 271 (1983) (“the California Unfair Practices Act closely parallels the Robinson-Patman Act, and is based upon the same policy considerations”); Uneedus v. California Shoppers. Inc., 86 Cal.App.4th 932, 937-38 (1978) (“The only significant difference between the Unfair Practices Act and the Robinson Patman Act is that the state statute proscribes price discrimination between geographic localities only, but fails to proscribe such discrimination between individual purchasers.”).
The federal courts have consistently held that, in order to prevail on a claim for geographic price discrimination under the Robinson-Patman Act, a plaintiff must prove that its injuries were caused by the discrimination, not merely by a lower price being charged in the location where the plaintiff competes with the defendant. The plaintiff must prove that the defendant loses money at the lower price but subsidizes that price with higher prices elsewhere. Otherwise, there is no causal connection between the price difference—the “discrimination”—and the plaintiffs alleged injury. As the court wrote in Shore Gas and Oil Co. v. Humble Oil & Refining Co., 224 F.Supp. 922 (D.N.J. 1963):
Injury is not an “effect” of discrimination directly. Rather it is the result of a low price which a discrimination in price allowed the defendant to charge....
[I]f there is no relationship between high and low prices, the low prices and consequent competitive injury are not the “effect” of price discrimination.
* * *
Thus, it is the general rule in territorial primary-line injury cases that to establish the necessary causative link between the price difference and the injury to competitors and competition, it must be shown that high prices aided the injurious low prices and enabled defendant to charge them. Conversely, if no relationship is shown between prices in the low price area and prices in other areas, the injured party’s case fails for lack of causation.
. . . [I]f it is shown that the low bid is below cost, it is fairly inferrable that profits made on other prices financed the complained-of low price. If the [lower] pace is completely self-sufficient, it may be inferred that no relationship between high and low prices exists, and therefore that the discrimination had not the proscribed “effect.”
Id. at 925-926 (emphasis added). See also Moore v. Mead’s Fine Bread Co., 348 U.S.115,119 (1954) (geographic price discrimination harmful where “profits made in interstate activities uld underwrite the losses of local price-cutting campaigns”); National Dairy Products v. Federal Trade Comm’n. 395 F.2d 517, 526 (7th Cir. 1968) (geographic price discrimination violates Robinson-Patman Act where “seller’s high prices in one area subsidize its low prices in another”); Balian Ice Cream Co. v. Arden Farms Co., 231 F.2d 356, 367 (9th Cir. 1955) (injury not caused by geographic price discrimination where local prices set individually upon local competitive conditions); Pacific Engineering & Production Co. v. Kerr-McGee Corp., 1974 U.S. Dist. LEXIS 12022 at *81 (D.Utah 1974) (“Price differentials may cause competitive injury only if losses incurred by the low price sales are offset by sales made at higher prices.”) (all emphases added).”
Based upon the above points and authorities and based further
upon the lack of evidence establishing any type of subsidizing of prices this
court must conclude that the plaintiff has failed to show that any alleged
loss of business in Los Angeles was caused by locality discrimination at the hands of the Daily Journal. Hence, the Daily Journal’s motion for nonsuit as to plaintiff’s second cause of action
is hereby granted.