218 F.

2d 202

Z. T. NAIFEH, dba Sooner Sales Co., Appellant,

v.
RONSON ART METAL WORKS, Inc., a corporation,
Appellee.
No. 4825.

United States Court of Appeals, Tenth Circuit.

Dec. 29, 1954.
1

Ted Foster, Oklahoma City, Okl., for appellant.

G. F. Rainey, Oklahoma City, Okl., for appellee.

Before PHILLIPS, Chief Judge, MURRAH, Circuit Judge, and RITTER,

District Judge.

RITTER, District Judge.

Z. T. Naifah, doing business as Sooner Sales Co.,1 brought action against

Ronson Art Metal Works, Inc., 2 to recover treble damages for alleged violations
of the Clayton Act, as amended by the Robinson-Patman Price Discrimination
Act, and particularly Title 15 U.S.C.A. 13(a) and 13(e).3 From a judgment
in favor of Ronson, Sooner appeals.

Sooner is a wholesale distributor of cigars, tobacco, candy, specialties, lighters

and drugs in Oklahoma City, Oklahoma, and in the surrounding trade area to a
distance of 75 to 100 miles from Oklahoma City.

Ronson, a New Jersey corporation with its home office at Newark, is a

manufacturer of cigarette lighters and lighter accessories which it sells in
interstate commerce.

On December 8, 1949, Sooner gave an order for lighter accessories to Buck

Powers, a Ronson agent. Thereafter, from time to time, Sooner ordered Ronson
lighters and lighter accessories and upon delivery distributed them to retail
dealers for resale. Each order was taken on a standard Ronson order blank, and

contained the express provision that the order was not binding on Ronson until
accepted by it at the home office in Newark, New Jersey. Sooner was allowed a
discount from the retail list price of 50 percent plus an additional 10 percent on
the balance. Sooner allowed retailers an average discount of 40 percent from
list price. At no time did Ronson give Sooner any directions or instructions or
impose any restrictions with respect to the prices at which the merchandise was
to be sold to retailers.
9

For approximately two years Sooner distributed to various retailers in the

Oklahoma City trading area a substantial quantity of Ronson lighters and
lighter accessories. All of the orders submitted before January 30, 1952, were
accepted and filled within a week or ten days.

10

On January 29, 1952, Powers called Sooner by telephone and arranged a

meeting at a hotel in Oklahoma City. At that meeting Powers told Sooner that
he would no longer be permitted to distribute Ronson products. There had been
some disagreement between Sooner and Powers about whether certain items
should be included in the orders, and Sooner advised the agent that orders
would have to be accepted as made up by Sooner and that he would not permit
Powers to make up the orders. Sooner protested the termination of the
distributorship and Powers said he would call the home office. On the
following morning Powers advised Sooner that the distributorship would be
continued and took an order amounting to $700 or $800. This order, together
with a number of orders subsequently submitted by Sooner, were never filled
by Ronson. Although he had no authority to bind Ronson on any order from a
wholesaler, Powers continued to inform Sooner that the orders would be filled.

11

By June, Sooner had a depleted stock of Ronson merchandise and was unable
to fill orders from retailers. He called Ronson's home office by telephone and
asked when the orders would be filled. He was told that an answer would be
forthcoming in the next few days. On June 9, 1952, an official of the company
wrote to Sooner and stated in part:

12

'At the present time we are reducing our distribution in most sections of the
country, and in your market area we find that we are very well covered with
distribution by other distributors.

13

'We therefore regret that we shall be unable to ship any further Ronson
merchandise to you. This move is consistent with our current policy of reducing
our distributors in all territories where we already have adequate coverage.'

14

On June 13, 1952, Sooner informed Ronson by letter that he did not care
whether he had the Ronson line any longer. A few days later Sooner made a
request to the Ronson home office to take back the remaining stock of
merchandise which had not been sold to retailers. Accordingly, Powers called at
Sooner's place of business on July 3, 1952, to inventory the stock on hand. He
offered to pack and ship to the home office all of the merchandise which
Sooner wanted to return and to give Sooner a credit memorandum for it. Sooner
was told that there would be certain deductions for transportation and handling
and that some of the items would have to be depreciated. Sooner refused to
return the items on the terms offered and insisted that Ronson pay cash for the
merchandise before it was shipped, in some instances in amounts greater than
those which Sooner had originally paid to Ronson for the same items. At the
time of the trial, Sooner had disposed of about half of the remaining items on
hand.

15

On January 29, 1952, the same day Sooner was notified that he would no
longer be a distributor for Ronson products in the Oklahoma City trade area,
Powers arranged with Consolidated Wholesale Company 4 to distribute Ronson
products in that area and took an order from them for about $700.00 worth of
merchandise. This order was filled in due course. Thereafter, Consolidated
distributed Ronson's products and paid the regular retail list price for
merchandise, less discounts of 50 percent plus 10 percent on the balance, the
same discount terms received by Sooner prior to January 29, 1952, on the
goods he had received from Ronson.

16

There is no evidence that Ronson discriminated in any way against Sooner,

although Sooner claims that Ronson's refusal to accept and fill Sooner's orders
after January 29, 1952, was a discrimination. There is no evidence that in
selecting Consolidated to distribute its products and in accepting orders from
Consolidated, Ronson did anything in restraint of trade or engaged in any
transaction which was not bona fide.

17

Sooner's position is that the conduct of the parties established him as a Ronson
distributor and customer in the Oklahoma City trading area; that from January
30, 1952, until shortly after June 9, 1952, while still a customer of Ronson, he
was forced to compete with Consolidated, another customer of Ronson, with a
depleted and non-representative stock of Ronson lighters and lighter
accessories. This disadvantage, Sooner claims, was the direct result of Ronson's
withholding delivery of goods ordered by Sooner, at the same time it was
making regular delivery of goods of like grade and quality to a competing
purchaser. Sooner claims that the failure to provide his with goods while

providing them to Consolidated was an indirect price discrimination in violation

of Section 13(a) of the Act, just as if the goods had been delivered at a
discriminating price, and that the failure to ship a supply of new stock to
replenish and maintain a representative line was a service discrimination in
violation of Section 13(e) of the Act. With this contention we cannot agree.
18

The trial court concluded that Ronson's conduct was not within the prohibition
of either the price or the service provisions of the Act and accordingly entered
judgment in favor of Ronson. The court reasoned that a seller must discriminate
in price or service in favor of one purchaser over another competing purchaser
in order to constitute a violation of Section 13(a) of Section 13(e) of the Act,
and that if there are not two or more competing purchasers, there can be no
violation of the Act.5 Since all orders submitted by Sooner were not binding on
Ronson until accepted by it at the home office in Newark, under the express
terms printed on each order, the failure of Ronson to accept orders after January
29, 1952, made Sooner no more than a past purchaser seeking to become a
prospective purchaser. Accordingly, Sooner, not being a present purchaser
during the period in question, could not qualify under the Act and therefore
could not complain of Ronson's refusal to sell.6

19

While we agree with the reasoning of the trial court, we believe that an
additional provision of the Clayton Act fully disposes of this case.

20

By the express terms of the Act, 7 Ronson had the right to do business with
whom it pleased. As a private trader in interstate commerce, Ronson not only
could select its own customers but also could refuse to sell its merchandise to
anyone and by so doing would in no way violate the anti-trust laws.8 It is
settled law that a seller may either refuse to negotiate or may cease doing
business with a customer without running afoul of the Act. It is also clear,
however, that if a seller chooses to negotiate and to sell goods of like grade and
quality to competing customers, he cannot discriminate in price or services
either to the advantage of one purchaser or to the disadvantage of another.9

21

In this case Ronson sold its merchandise to Sooner for many years and in
January of 1952 decided to terminate their business relationship. Accordingly, it
did not fill Sooner's orders after that time. The trial court found that Ronson had
neither accepted the order of January 30, 1952, nor any of the orders submitted
by Sooner after that date. Inasmuch as there was no basis either contractually or
otherwise, whereby Ronson was bound to fill such orders, Ronson's conduct
was not in violation of the Act. When the order was not filled within the
effective time, Sooner was bound to know that it had not been accepted. There
generally is no duty on the part of the person to whom an offer to purchase is

made to notify the offeror of his refusal to accept the offer. And further, no
presumption of acceptance arises from a failure to so notify. 10
22

Of course, Sooner was left with a depleted stock and some slow moving items,
but that was a hazard Sooner necessarily took under the terms of the informal
distributorship arrangement which had existed prior to January 30, 1952.
Moreover, Ronson offered to permit Sooner to return the items which he did not
wish to retain, at the price Sooner had paid therefor, less a transportation and
handling charge and depreciation on certain items. This offer Sooner rejected.

23

Congress has been liberal in enacting remedies to enforce the anti-trust

legislation. However, in no instance has it indicated an intention to interfere
with ordinary commercial practices in interstate commerce which are bona fide
and not in restraint of trade. The right of a manufacturer to select customers is
an essential factor in maintaining high standards of service in the handling of
his products. The Supreme Court of the United States has said that it is 'loath to
deny * * * this privilege of selection',11 and this court is constrained to exercise
the same restraint.

24

The court in Great Atlantic & Pacific Tea Co. v. Cream of Wheat Co.12
expressed the policy applicable to this case when it said: 'We have not yet
reached the stage where the selection of a trader's customers is made for him by
the government.'

25

For the reasons herein set forth the judgment is affirmed.

Hereinafter referred to as Sooner

Hereinafter referred to as Ronson

Title 15 U.S.C.A. 13(a) provides in part: 'It shall be unlawful for any person
engaged in commerce, in the course of such commerce, either directly or
indirectly, to discriminate in price between different purchasers of commodities
of like grade and quality, where either or any of the purchases involved in such
discrimination are in commerce, where such commodities are sold for * * *
resale within the United States * * * and where the effect of such discrimination
may be substantially to lessen competition or tend to create a monopoly in any
line of commerce, or to injure, destroy, or prevent competition with any person
who either grants or knowingly receives the benefit of such discrimination, or
with customers of either of them * * *.'

Title 15 U.S.C.A. 13(e) provides: 'It shall be unlawful for any person to
discriminate in favor of one purchaser against another purchaser or purchasers
of a commodity bought for resale, with or without processing, by contracting to
furnish or furnishing, or by contributing to the furnishing of, any services or
facilities connected with the processing, handling, sale, or offering for sale of
such commodity so purchased upon terms not accorded to all purchasers on
proportionally equal terms.'
4

Hereinafter referred to as Consolidated

Bruce's Juices v. American Can Company, 1946, 330 U.S. 743, 67 S.Ct. 1015,
91 L.Ed. 1219; Chicago Sugar Co. v. American Sugar Refining Co., 7 Cir.,
1949, 176 F.2d 1; General Shale Products Corporation v. Struck Construction
Co., 6 Cir., 1942, 132 F.2d 425; U.S. v. Borden Co., D.C., 1953, 111 F.Supp.
562, and A. J. Goodman & Son v. United Lacquer Mfg. Corp., D.C., 1949, 81
F.Supp. 890, 892, where the court said: 'Here there is only one purchaser * * *.
It is not enough that a prospective purchaser, the plaintiff, would have had to
pay a higher price if it did buy. There must be actual sales at two different
prices to two different actual buyers.'

Shaw's, Inc., v. Wilson-Jones Co., 3 Cir., 1939, 105 F.2d 331, 333, where the
court said: 'The discrimination in price referred to must be practiced 'between
different purchasers'. Therefore at least two purchases must have taken place.
The term purchaser means simply one who purchases, a buyer, a vendee. It
does not mean one who seeks to purchase, a person who goes into the marketplace for the purpose of purchasing. In other words, it does not mean a
prospective purchaser, or one who wishes to purchase * * *. Past purchases or
conversations in respect to possible future purchases are insufficient.' Chicago
Seating Co. v. S. Karpen & Bros., 7 Cir., 1949, 177 F.2d 863; and Sorrentino v.
Glen-Gery Shale Brick Corp., D.C., 1942, 46 F.Supp. 709, 711, where the court
said: 'Plaintiff's arguments that his past purchases from Glen-Gery make him a
'purchaser' within the meaning of this section and that defendant manufacturers'
refusal to sell him while selling to Margolis (a competitor) constitutes a
'discrimination' between 'purchasers' in violation thereof cannot be sustained.'

Title 15 U.S.C.A. 13(a), provides in part: 'That nothing contained in sections

12, 13, 14-21, and 22-27 of this title shall prevent persons engaged in selling
goods, wares, or merchandise in commerce from selecting their own customers
in bona fide transactions and not in restraint of trade * * *.'

Johnson v. J. H. Yost Lumber Co., 8 Cir., 1941, 117 F.2d 53, 61, where the
court said: 'It must be borne in mind that one engaged in private enterprise may
select his own customers, and in the absence of an illegal agreement, may sell

or refuse to sell to a customer for good cause or for no cause whatever.' Green
v. Victor Talking Mach. Co., 2 Cir., 1928, 24 F.2d 378, 59 A.L.R. 1091
9

Chicago Seating Co. v. S. Karpen & Bros., supra (177 F.2d 866), where it was
said: '* * * defendant refused to sell to plaintiff. Even if true such charges do
not constitute discrimination in favor of one purchaser against others under the
provisions of the Clayton Act. * * * As we see it, the laws of the United States
do not require that persons engaged in private trade and commerce must deal
with everyone. When they do deal they may not discriminate, but they do have
the right to choose their customers. * * * A trader engaged in private business
may exercise his own discretion as to parties with whom he will deal.'
Shaw's, Inc., v. Wilson-Jones Co., supra, where the court said: 'The Act does
not compel a seller of commodities to offer them to all persons who may wish
to bid upon a contract to resell them to a third party. The discrimination in price
prohibited by the subsection is discrimination in respect to commodities sold to
purchasers.'
In holding that a service discrimination under Section 13(e) of the Clayton Act
as amended by the Robinson-Patman Act had taken place, Judge L. Hand in
Sun Cosmetic Shoppe v. Elizabeth Arden Sales Corp., 2 Cir., 1949, 178 F.2d
150, 152, 13 A.L.R.2d 358, said: 'The Act does not undertake to forbid a seller
to grant favors to his customers, any more than it undertakes to compel him to
grant them; it only insists that the distribution, if any, shall be equal.'

10

77 C.J.S., Sales, 28, p. 643; Reliance Bagging Co. v. Electric Gin Co., 1945,
208 Ark. 829, 187 S.W.2d 724
11 U.S. v. Bausch & Lomb Optical Co., 1944, 321 U.S. 707, 64 S.Ct. 805, 816,
88 L.Ed. 1024.

12

2 Cir., 1915, 227 F.2d 46, 49