Anheuser-Busch, Inc.

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IN THE ~IA TTER OF ANHEUSER- BUSCrI, INC.

ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATIO~ OF SEC. 2(a) OF TI-IE CL.\TTON ACT Docket 6331. CollljJ7aillt, A..jjj". 19, 1955-Dccisioll, Sept. 10 1957 Order requiring one of the nation s leading breweries, with manufacturing plants in St, Louis, Mo., Kewark, N.J" and Los Angeles, Calif" to cease reducing beer prices in any market where it competes with others unless it pl'opol'tioDally reduces prices everywhere, follo"\Ying findings that in 1954 while maintaining its price elsewhere in the nation, jt had reduced the price on its Budweiser beer in the St. Louis area to match its regional competitors' price, with general adverse effect on the local market and in ,iobtion of Sec. 2(a) of the Clayton Act as amended. illt. FT'Clncis O. jjj aver and illt. Philip R. ill eZangton for the CommlsslOn.

1111'. D.wight Inga1nells of St. Louis, :Mo. lFhite Oafse by ilf1' Ed,r;ai' Barton and illr. 1-101Ca1"(1 J. A? beZ all of New York, N. , and GTCweUe, lVhitloclc lIlarkev, by illt. 1-1arold F. Bake?' of "\Vashington, D. , for respondent.

J1.aTIAL DECISIO~ BY FRANK fIrER, HEARING EXA1\finer Formal compbint herein, issued April 19, 1955, charged respondent "ith price discrimination in violation of Section 2 (a) of the Clayton Act, as amended (15 U . C. 13), in drastically cutting its price of beer in St. Louis and St. Louis County, while maintaining it else,yhere in the. Nation, thereby causing substantial competitive injury to respondent's competitors in the. reduced area through loss answerof sales to them and consequent gain to it. Respondent's filed June 17 , 1955 , admitted descriptive and jurisdictional facts the reductions and their amounts, denied discrimination and the effects alleged therefrom, and affirmatively ple.added that. such price reductions were made in good faith to meet the equally low prices of competitors; "ere made to meet changing market conditions and were justified by differences in the. cost of manufacture, sale and delivery as between areas. After ten hearings, resulting in 1118 pages of transcript, and 73 exhibits for the proponent, 217 for the respondent (one. of the latter being 15 feet long), the trial wound up on l\Iay 15, 1956, after which proposed findings of fact, conclusions . , Findings 54 F.

of law and briefs .were filed with me by all counsel. Upon these and the remainder of the record in this case, I make the following: FINDINGS OF FACT 1. Anheuser-Busch, Inc. (hereinafter referred to as A. is a corporation organized, existing, and doing business under and by virtue of the laws of the State of ~fjssouri, with its office and principal place of business located at 721 Pestalozzi Street, St. Louis :Missouri.

2. A.B. is primarily engaged in the distribution and sale of alcoholic malt beverages under the brand names of "Budweiser Busch Bavarian Busch Lager" and "l\fichelob. JIichelob" is distributed solely as a, draught beer Busch Bavarian" solely as a packaged beer, ,-rhile "BuchYeiser~' and "Busch Lager~' are distributed both as a draught beer and as a packaged beer-in bottles and in cans. A.B. in the sale of packaged beer employs the basic unit of a case, the number of individual containers therein varying as to size and type. A.B. produces these beers in breweries located at St. Louis, ~fissourj, KewaTk New Jersey, and at Los Angeles California.

3. A.B. now occupies, and for many years has occupied, a major position in the brewing industry on a nation-wide basis, as illustrated by the following comparative table:

I Total paid tnx 13. (!ross IIPerccntngeof ' ?\ational withdrawals sales tot:.!! rank nnTTels 1952______-------------------- nn_____- 830 480 034. 443 1953- __on n n - n - - -- ------ n n - - - n 8fi. 045. Ilg, 7 J 1 222 1()54 - - - n - - - -. - - - n - n n - n n - -- n h - - -- - - - n n n - 83: 305: 402 , 82S. 7GO 1955n nn __n hh- n n - - n - - - - - _h - - - - n - - - - --- - 974 175 616 7U3 NOTE. s assets in 1954 were $111.000.000. 4. A.B. has been, and is now, selling its beers in a constant stream of commerce, as "commerce " is' defined in the Clayton Act, from the states and places of manufacture to customers and purchasers located in other states, and there is now, and has been, a constant current of trade in such commerce between and among some of the various states of the United States and the District of Columbia in substantial competition with other brewers similarly selling and distributing beer in such commerce.

5. A.B. sells and distributes approximately 75% of its beers through some 700 ,-rholesaler-distributors ,-rho resell to licensed dealers and dispensers in their individual trading areas, and approximately 2.5 percent through 18 branches of respondent, located in ANHEUSER-BUSCH, INC. 279 277 Findings various metropolitan areas directly to bars, liquor stores, chain grocery stores and other retailers.

6. Beer production is widely difl'used1 , primarily beca.use it is a bulky product with high shipping costs relative to unit value. Other contributing factors are the great variety of laws and other regulations in the various states for licenses, the size of containers, the use and amount of advertising, and taxes. This has resulted in the creation and functioning of many local c.ompetitive trading areas usually centering around one or more localized breweries, whose orbit of c.ompetition varies directly with the public acceptance of the taste, body, and effect of its particular brand, plus, of course, its financial resources and selling drive. Thus, there are beers "which are sold only in one city, or one county, or only one state, or within a small mileage radius from the brewery which may cover parts of several states. These have been referred to in the record as "local" beers. Others seJl throughout a mllJtiple state area, but. not nationally, in significant vol11111e. These have been referred 10 as regional" beers. Five bre\H'rs- , Schlitz, Pabst, :Miller and Blatz-because they sell and ship into aJl states in significant volume are referred to :l.S "national" beers, and there are a few others. It is true, as responclenfs counsel insist, that a given beer may classed as regional in one place, local in another, and national in another and, therefore, the three terms have no fixed or constant meaning, competitively 01' price-wise. Nevertheless, they are handy, if loose, desc.riptions of their sales orbi t, geographically, and the respondent itself in its sales surveys, memoranch and general business operations uses them. For the purposes of this deeision a "local" beer will mean one \,which is sold in substantial volume in three states or less, a " regional" beer, one which is sold in more than three but less than 48 states in substantial volume, and a "national" beer, one: which is sold in such volume in an 48 states. 7. Retail distribution is through two distinct chnnnels-ofl' premise and on-premise consumption-package stores and supermarkets on the one hand-taverns, bars, and restaurants on the other. Practicany all draught. beer is eonsumed on-premise, and in 1H34 after the repeal of prohibition, 75 percent of all beer produced in the United States was for on-premise consumption. However, since then, due perhaps to the increasing movement to the suburbs, television, and the broadcasting of sporting events, the decline of the tavern as a community social and recreation center, and the shorter work week, the flow had been almost reversed so that in 1954- only 35 percent. of the heel' produced was consumed on the premises. In 1934- there was only an insignificant amount of heel' sold by grocery . .

54 F. Findings stores. Today more than 50 percent of all packaged beer consumed off-premise is bought in grocery stores.

8. All of the above distributive characteristics directly affect price and competition in any given Inarket. There are many more. )fost brewers price f.o.b. the brewery. To this must be added varying freight costs, taxes by states, counties and cities, and varying markups by distributor and retailer. Local social and economic conditions also have their effect. All of them are beyond the control of the brewers, yet the price to the consumer is controlled by them. 9. The complaint in this proceeding aJ1eges that "historically, A. has sold and distributed beer on the basis of regularly established premium prices genendly substantially higher than those prices charged by the various local and regional competing breweries located throughout. the U. This allegation is denied and vigorously contested by respondent, which introduced voluminous statistical data to show the contrary. Counsel supporting the complaint do not claim this allegation to mean that there is a uniform or constant. differential in price. obtained by A.B. oyer prices obtained by regional and local beers. They concede it varies from market to market amount, that it varies on the various markets from time to time, and that there. may be more than one difl'erential in any given market; but the,y insist that in the. great majority of markets there is some premium obtained by A.B. over the prices of its regional and local competitors. The record amply sustains this position. According to a survey conducted by respondent itself, of 78 major markets, considered by it to be a representative CTOSS section of the country, out of 113 305 price. comparisons between A. s Budweiser beer and all other regional or local beers (so characterized by A. ), 100 392 or 88.6%, showed a differential o:f 5~. per bottle or c~n ~ or mor2 higher for Bl1dwej~er. Over local beers only, D3. 270 of the price comparisons sho,,';ed a difl'erential up to 101 per bottle in fnvor of Bl1chreiser. This same SlllTey, compnring clifl'erentials as between liJav 195-1 and October 1!)53~ show many shifts and chanil."es from no differential to a clifi'erential and vice Yersa, as 'yell as many shifts in the nmonnt of clifl'e.rential, but the fact. remains that in ilw oyenyhehning majority of instances theye "as scme difl'erential. A September 1955, pendentelite ne" survey by A.B. reduces the abo' percen tages in some degree, depending on the classification of one or more. beers, llcyertheless it does not change the picture that in hy ar the greater majority of markets and instances, on both' the price to the consumer nnd to the retailer, Dllcl"eiser commanrls :l higher price than local :1nd regional beers, This statistical eTiclence is confirmed ~ particularly in its historical aspect, by the testimony of the qualified officials of A. s three most competitive' St. Louis ANHEUSER-BUSCH, INC. 281 277 Findings competitors; who sell regionally over wide areas, and by a representative number of beer retailers, called by respondent for other that effect, and nonepurposes. All of these testified categorically to of them could recall a single instance where Budwe.iser sold at the same price as the brands put out by the three St. Louis breweries adverted to above-always commanding some differential. Finally atand conclusively, A.B. itself has published large advertisements, the time of the St. Louis price reduction hereinafter described stating:

Now you can enjoy Bndweiser at ordinary beer prices; world1; ancl The same Buc1wei~er that still sells at premium prices around the The same Budweiser that outsells any other beer. obtain or increase sales Such assertions broadcast. by respondent to cannot now be gainsaid or ,,'aterec1 dm\n by respondent. The finding on this point, accordingly, is that most of the time, and in the large majority of the nation s markets, Budweiser was sold by A. at some favorable price differential or diffe.rentials over beers of local or regional distribution.

10. In the spring of 1953, the breweTY workers' union struck all the plants of the national shipping :Milwaukee brewers-Schlitz Pabst., ~Iillers, and Blatz-most of the "national" beers. The strike ,vas dra,vn out until August of 1953, the settlement being for increased "'ages. A.B. was not struck and enjoyed substantial sales increases nationally with its national shipping l\lihvaukee com- , it, toopetitors out of production. Although A.B. was not struck sig11ec1 a wage-increase contract, and, ns a result, on October 1, 1953 it and its ~Iilwaukee "national" beer shipping competitors increased prices generally in varying amounts, depending upon locality. The three St. Louis brewer eompetitors of A. Falstaff Brewing Corporation (hereinafter referred to as Falstaff), Griesec1ieck ",Vestern ), Rnc1 Griesec1ieekBrewery Company (hereinafter referred to as G."\V. Brothers Brc\\ery Company (hereinafter refe.rrecl to as G. ) did not fol)ow this raise in prices or make a.ny increase in prices, continuing to sell in the St. Louis market (St. Louis and St. Louis County) at $2.35 per 24, 12-oz. case of bottles, although many other regional and local brewers in other sections of the United States decline in sales for the industry did so. There was, as a result, fl 6()( generally, and a sales decline for A..B. speeii-ically from 418 barrels in N ovem ber 1952 , to .oJ,Oc:l: DOS barrels in X ovember 1953, nawere 478 6-4:7 tionally. Comparable f-igures for December of 1952 barrels as against L157 640 barrels in 1953. A sales graph eomparing , 1953 '\with 1052. B. sales ,"ith industry sales, month by month shmvs industry sales in October 1053 even with October 1952, but B. sales J4% greater in October 1953 than in 1952, whereas in ____ _ ____ __ _ , _ _ Findings 54 F.

November 1953, A.B. sales were only 5% greater than in the same month of 1952, and industry sales 5% less, but in December 1953 industry sales were off' only 8% compared with December 1952 whereas A.B. sales were 30% under 1952. In some states A. s sales declines ranged as high as 83%. This, however, was not the picture in the St. Louis market, where A.B. and Falstaff gained in 1953 over 1952, as shown by the following table:

Barrels 1952 953 Nove mber Decem brr N ovem her December B_-- - - -n_n n- - n - - - - - n - - - - - -- - - - - - n - n --- 15, 841 18, 148 306 239 Falstaff - - n - n - -u -- - -- _nn - - u- - - - - - - n - - -- -- 20, 796 973 547 , 218 B--___n______-- ----- -------------_u- 14. 003 16, 559 491 177 O. \V - _n_- n _n_n - - _n--- - _n -- -- - n - --- n - - -- 715 471 731 509 11. As of . anuary 3, 1954 B. "as selling its standard 24/12 oz. cases of regular returnable bottles out of its direct-to-retailer branches. at the following prices net to the retailer: St. Louis, Mo. ---------------- $2.93 'Vashington, D, C, ------------- $3. 6:1 Chicago, Ill. 3.44 Detroit, Mich. ---------------- 3. Cincinnati, Ohio -------------- 3.75 Boston, Mass. ---------------- 3. . Houston, Texas --------------- 3.70 Kansas City, Mo. __---_n____- 3. 1;) Bronx, New York ------------- 3.G8 St. Paul, 1\linn. --------------- 3.5:3 Kearney, Nebr'. --------------- 3.68 Sioux Falls, S, Dak. ----------- 3. St. .Joseph, 1\10. --------------- 3.17 Denver, CoJo, Buffalo, N.Y. ----------------- 3. Cio San Francisco, Calif. ---_n__ - 3. Baltimore, Md. ----------------- 3.(;2 Los Angeles, Calif. -------__n- 3. 12. On .January 19M:, on this same unit of sale, A.B. reduced its price from $2.93 to $2.68 in the Sf. Louis market, and again June 21 , 1954 , cut its prices on the same unit of the same beer to- $2. , which was and had been the price on the same unit charged and received by A. s three above-named St. Louis brewer competitors, A. s price changes are shown by the following table: N el to Retana Dec:. 31 195:1 Jan. 4 1954 'June21, 1954 BOTTLES 24/12 oz. Het. Reg--_n_n__n n__--_h__U___uuu_------- 2. ga 2. !is :!4/12 oz. N. H. Heghu_n__---_U h_______u_nn--_--_U__ a. Hi 24/12 oz. N. H. 4/(i UhU___-_-_____--n__ _h_____ 3. If! 1:!i;J2 oz. Het. Hegh---_u------ -_h_ _uu_u_--_u_--------- :1.41 :1. 41 2. on 12/:~2 oz. YH. Reg_____ __UhUU--_---Uh--___UUu_n----- 3. so 3. (j, 36/7 oz. Rel - U - U h n -- -- - -- -- - - U - - - - - - n c.\?\S 12/1201,- - - --_u- ____-n_u --_- _u --- -n -- - - _n- _uu _h_- 1. !ii 1. tio I. ,')1 48/12 oz. 8/6__ ---_hu --_-__-______n_h G. fis (i. 40 24/12 oz. Hc!!_u___h_- __ n - -- - - - U- ---- -- h- ---- --- _u- -- -- --- 2. (Jl1 Draft:GIIT BncI"' elsl'r - _nh - -- - h -- _u - - - - n - --- h- ---- --- - --- - - --- - u- -- 12. 12. 12. M icheloh_ - ----- ---- - ----______n- ----_u --- ---- ------ 13. 9S 13. 9S 13. ANHEUSER-BUSCH, INC. 283 277 Findings Nowhere else except in the St. Louis market did A.B. make the same or any comparable reduction in price.

13. From this, the complaint charges, and counsel in support thereof contends, that A.B. discriminated in price among its customers, namely, that by cutting and eliminating the price differential to its customers in the St. Louis market, it discriminated against its customers in other markets by continuing to charge them higher prices. Respondent contests this, claiming that because its prices vary from market to market, and are not level or uniform throughout the rest of the nation, that because the amounts by which its prices exceed those of local and regional bre\yers in those markets likewise vary, that in some few markets there is no excess differential, that these difl'erentials may c.change momentadly, and A.B. cannot alone maintain them, there can be no discrimination. These arguments are an specious on this record. The fact is that in more than 80% of its markets, A.B. did set its prices to obtain such differentials-that it was obtaining them-that it did not cut its prices any"here as to eliminate or materially diminish them except in the SL Louis market, a situation which.h is the classic regional price discrimination with competitively unimportant embroidery. Po' rto Rz:cm/1.. American Tobacco Co. 'v. Am~?'i.can Tol)((.cco Co. 30 F. 2d 234; E. E. .1111.71el' Co. v. 142 F. 2d 511; JJ OOi' e, v. .:11 e(ufs Fine Bread C(). 348 U. S. 115; In 1'e ill a pyland B aking Comp((:ny~ Docket 6327; In Fe Cene1Yd Foods (/O'i' Docket 5675; and others. The. finding, ac.cordingly, is that on lTanuary 4 , 1954, and until .Tune 21 , 105,1, and on June 21 , 105- , and subsequent thereto until 195:'5, respondent did discriminate in the price of its beer, between its customers located in the Sf. Louis market and elsewhere by the price reductions in that market, above set out.

14. The Sf. Louis breweries distribute and sell as follo\ys: A. in all 48 states; G.B. in 13 state. , Alabama, Arkansas, California Illinois, Indiana, Iowa, Kansas, Kentucky, :Missouri, :Mississippi Okln.homa, Tennessee and Texas; Falstaff in 2G states in the "... est l\1ichrest, South, and Southeast; G.",V. in 20 states, west to California east to Pennsylvania, south to Georgia, and north to 'Visconsin and l\1iehigan. As of January 1 1954, G.B. sold about 24% of its output in the Sf. Louis market, Falstaff about 1"1%, G.'V. about 25%, and B. about 31j2%.

15. For the year 1053, the respective shares of the St. Louis market in packaged beer by these four St. Louis brewers "ere: A. 12.5%, G.B. 14.4%, Falstaff 29.4%, and G.'V. 38.0%. For the first six months of 1954, follo'\ying and ineluc1ing the first price reduction by A.B. on January 4 , 1054, but not. including, to any appreciable extent, sales after the second price reduction on June 21 , 1954, these 525577-60- !) , 284 FEDERAL TRADE CO~\IISSION DECISIONS Findings 54 F.

market shares changed as follows: A.B. 16.55%, G.B. 12.58%, Falstaff 32.05%, and G.\V. 33%, or, in terms of rank, G."\V. remained first, Falstaff remained second, but A. B. replaced G.B. as third, the latter becoming fourth. During this time the total packaged beer sales for the first six months of 195- , as compared ,,-ith the comparable 1953 period, increased from 5 14~l: to 6 110 326 statistical cases, or 2.756. I-Iowever, 122 !)~n of the eases, represented the increased sales of "all other beers/~ that is, beers shipped into the St. Louis market by breweries located else,,-here, such as :Jlihraukee so that the increase in total market package beer sales of 163 182 110 326 minus 5 947 144) is in fact reduced to 40 191 cases, or an increase in total local brewery packngec1 sales of only G8%. ,With all other (outsideJ beers" thus increasing in sales, it is obvious that s increase in market share from 12.5% to 16.55% must have come from corresponding losses by G.B. and G."\Y. of 1.82% and 8)'6 respectively. This first price reduction "-as accompanied by changes in, and a stepping up of~ sales nc.tivity by A.B. by chnnging from telephone solicitation of orders to a route-,,-agon system of solicitation and delivery which converteel every driver into a personal-solicitation salesman, and a. great expansion of its aclyertising in the S1. Louis market.

16. It ,,- , ho,vever, alter the .June 21 , 1!);)~ , price reduction B. that the roof really fell in on the Sf. Louis market. A.s above set out, this reduction was from the .Tann:uy ~1 , 195:1: , price of $2. per case of 2.4/12 oz. regular retnrnf\hle bottles to S2. :3C1, exactly the same price, for the same unit, as G. , Falstail' and G. "\Y. hael been selling at for a number of months. This reduction remained in force until :March 1 , 1955 , shortly before formal complaint herein WflS issued, at ,,-which time A.B. increased its price to ~2.S0 for the same unit.. Shortly thereafter G.B.. G."\V.. and FaJstafl' increased their beer prices on the S1. Louis mnrl;;:et for the snmc sales unit from 82, 35 to $2.50. The difrerentinls between A.B. and the other three mentioned brewers in the St. Louis Hwrket "-ere thus 58~~ prior to January 4 , 195,1; 33~~ from .Tm11lary 4 , 105.-1-, to .June 21 , 1054:; difl'erential from . Tune 21 , 19;3- , to ~larch 1 , 1055; and 30f. thereafter ~ all differentials being in favor of A. 17. The impact of this second price reduction by A.B. on its o\,n sales ,,-as to increase A. s share of the St. Louis mn rket progressively to the follm\ing percentages: .July :37. 6fj"O; August :37.;37'0; Septt' mber 37.5%; OctolJPr 35,7)(; :\'ovember 3-:1. 1)-c; December 38. ~~c; January 1D55 33.2%; February 1 D;'J5 3D. 3/~' j "whereas Falstnfl'" s percentag:e share of the same market decreased horn 2D.Gr;6 in .June of 1054 to 25,7% in .Tuly, :?G.l % in ..~\.l1g11st~ 2G.8% in September, :?8.1 % in October, 29.4% in Xovember and December, 30. _____:::::::::::::::::_______________________ _____ , , . ) ::!/j. ANHEUSER-BUSCH, INC. 285 277 Findings in January 1955 , and 29.1% in February 1955. :More striking decreases "'ere suffered by the other t",o. G.B. declined from 11.2% in June 1954 to 8.3% in July, 8% in August, 7.9% in September 8% in October, 8.8% in November, 7.9% in December, 5.3% in January, and 4.8% in February of 1955. G."\V. had 29.3% of the St. Louis market in June 1954; slid to 21.3% in July, 22% in August, 21.3% in September, 22.5% in October, 22.9% in November 21.7% in December, 27% in .January of 1955 , and 2. jo in February of 195;"5. In rank A.B. jumped into first place by a wide margin and held that position throughout the eight-months' period. The St. Louis market, on the other hand, in total sales increased about 2% (9 174 278 (July 1954 through February 1955J, as against 307 770 (same period 1953-1954J) or an increase of 776 508 CRses. , on the other hand, sold only 1 121 065 cases in the same period 1953-1954, but 3 380 648 cases during the comparable period ~Tnly 1954-February 1955, an increase of 201.5%, or a tripling of case sales.

18. The fun statistical and sales volume picture for both price reductions is shown by the following ta.bnJations: ST. LOUIS AND ST. LOUIS COU::\"TY-PACKAGE BEER A~HEUSEI-l-B(JSCH , E',C.

Area total sales Percent Statistical Share of chan~' cases total previous Pen' en!. year StntiQical Share of change ca~cs total prc';"iol1s ye:Jr Percent 14. 283 100 7GI\ 107JmL-_ +0. +25. I):!O 14. O8S) Hlo 121 ,F(.h____ 837, :!~fl +5. (ili;;! 13.1\1ar__ 130 949 Ino +5. 4011 15. Ii Hifl, 1""3 100 +Jf)..'\pr_-- +31.+11.3 :~. +111 100 7Ii, f,2G 15. .:;\la'.'__ 165, OlillI,55070 JUIIl' __- h- 320, 1~7 2:!. 1\ +8Ii 1 ,117 1 ". 1 00 +0.July - - 542 779 37. +201i. 1:442:573 JOO +0. \ HI!. - - - - - -- -- - - -- - --- 475. Sfl7 37. +Ifa. fJ 277 100 +10. 121Sept. - - - ,157, nr,() ~~7. +HHU\ 1: 22~ 501 Ino +3. Cel__ 374, fli14 35. +J63. :2 , 05~ 41.17 100 1.15No\'__ 335, 321i 34. 1 +19Ii. 9~I. 96S 100 +Il. 0 JOO +-3. 105 'J75 3S. '121 1 i +1\)4.Dec--- \1\101--- 27. +3. + 1')( 5 1~ GlfI, (jarl Total - - , 188,915 I 100 105.

.T'1~1_ 274 5J3 3:3. 2 +155. 827 7S:'; 100 +R. FI~b__--___-_--____hh 4m, 5!i8 :~9. +3mJ 21\7. 875 JOO +;;1. 4 Mar- - - H13, 47S 24. +18. 790. !I:'!! IUD In. Apr--_____---------- 182. (j51 19. 5 +10. 931;. 100 12. 1'19.)'__ 217 , iifq If/. 0 +;~1. 5 141; 2:,0 JOO +7. JIITll'__ _h_---- 257. 1)41 21. . ?2G. 7:,:) JOn 13. JlIly__ 2:33, 5/\! 21.!) -'J7. 297 0;)1 100 10. Au~- - - - ---- :!lif\ 72() 19. -44. 1. :~IG, ,'1.';7 100 5.. 8\\pL_ 23::. 4/n ZO. /) 19. 11\5, :~!J, IOU J. , OC;L______- J7:2. (11,2 19. f):t9 mI. 11\1- Ion 1;). 18:';. 1\0:: 19. 45. 950. 0:;5 J00 21!). 220 20. -48. , Oli1. 4S,'; 100 Total_ fJ.'\2 on2 2a. I) , Ii. Ii 931i (i- 100 1. \) __________ _ Findings 54 F.

FALSTAFF 1954 1955 Jan- -- _--_On ---- -- - 250, 712 32. +16. 250, 185 30. -0. Yeb--- 27\1, 860 33. +27. 309, 373 29. +32. 1V1ar - - - - - - - -- - - n 312, 598 32. +24. 233 447 29. 25. Apr--_ --- -- __n -- - 349 016 32, +27. 351 055 37. l\Iay u :Ho, 504 32, +9. 431 846 37. +24. June__ -----------_u_- 419 739 29. +4. 361 963 37. +10. July__ 3il. 790 25, 498. 260 38. +34. Aug- - - --- 332. 896 26. 529, 218 39. +59. Sept - ----- ---- -- 32ti 809 26. 472 019 40. +44. Ocl--------- 295, 031 28. 12. 3RO, 130 41. 7 +28. Noy - - -- - --u- -- ----- - 28\1 066 29, 401 112 41. 8 +38. Decu - - 324 994 29. 442, 964 41. 7 +36. Total. - --- 899 015 29, +3. 821, 572 37. +23. GRIESEDIECK BROS.

1964 1955 Jall- -- ---- , 493 13. 14. 44 HO 55. G eb_-- 107 151 12. 12. 60: 351 -43. Mar- - 123, 552 13. 10. 68. ::H4 44. Apru_---- 142, 410 13. 1. 3 9;)2 52. 137 814 12. 16. , 108 ;~~l 0 ~~:~L::::::::::::::: : ~8, 098 11. 2 21. 9 , 43i -43.July - ------ 120 201 46. 713 -27. 101 , ti82 32. 746 171 39. " 78. 320 18. (j Oel------ 81. 672 42. 6()~ 488 25. Nov_._--- 86, 667 30. . li2, 782 27. Dec.-- 256 7. (I 39. 068 : 20. Total-_ 342, 1G7 10. 26. 8 I 867 402 6. 35. RlESEDIECK WESTER:':

1954 1955 Jan_ 2i3, 193 12. 223. 73(; r--------27. 18. I FelLu -- - 2\11 829 34. 11. H 293. 221\ 23. I Mar_ 338. 061 35. H 10. 201;, H96 2(;. :i8. Apr--_ 352 193 32. II 10. 271 067 28. n 23. i\'I:1Yu 19Z 32. 22. t1 332. 132 2\!. (I Julie_ 414 170 :m. 28. \J 340. 93D 27. li. July__ 30i 126 21. 3 47. 348. 354 26. +13. Aug_ 280 749 22. 32. 3(;2. 833 27. +29. Sept.- ------- 2GO, 145 21. 3 40. 30\J, 354 2G. +18. 9 Oet.-- 236, 158 22. 36. 242 325 26. (i +2. Noy 224, 4!ii 22. 9 29. 251. 380 26. +12. Dec-_- 239 69i 21. 7 37. 271 543 25. +13. Total-- 565, Oll 27. 28. 453, 576 26. i -3. I have rarely seen sneh a dramntic exhibition of ec.onomic. po'\\el' and price sensitivity in so short. a time. Apparently the beercons11lning populace in the St. Louis market equates premium quality with premium price. The tremendous switch from other beers to Buchveiser ,,-hen the premium price was eliminated cannot on this record, be otherwise accounted for. Apparently also it is the first 30~ or less of premium or ditTerential in price which touches ofl' the reaction in the. St. Louis market. Comparison of results from the (January 4, 1954 and .June 21 , 1954 reductions shmvs this. _. . / %. ANHEUSER-BUSCH, INC. 287 277 Findings 19. This is further illustrated and confirmed by the reaction to the :March 1 , 1955 , increase in price from $2.35 to $2.80-45~., the almost immediate increase of G. , G.",V. and FaJstaft' to $2. , or 15~ increase-the differential then and since being 30~. Gain and Joss in market shares is shown by the following tabulation: Dec. 31, June 3D, March July 31, 1953 1954 1955 1955 B un - - - - - - -- - - - - - - - - - u - - - - - - - - - 12. 16. . 39. 21. 03 G .Bu___- - n__- -. - --- -- ---. -- - n_- nn- n- -- --- 14. 12. Falstaff- - - ---- --- n - n - n n - - - - n - - - 29. 32. 29. I 3fL 62 G .\" - - -- - - n - - - n n n n - - n - - - - - - _.. - -. -- - - - - - 38. 23. I 27. All others- - - _nn -- - n - _n n n - - n- -- --- n- ----- - It is obvious that A. s gains during the "price experiment" came from G.B. and G.",V. Respondent claims that. if market. statistics are run through February 1056, almost a year after the complaint was filed, they show A.B. down to 17.9%. Regardless of "hat cut-off date is used i\.B. had only 12.5% of the market just before its first price rednetion, but. "found up after a price differential was reestablished with from 18% to 21 )'0 a gain of 51/:2% to This respondent c.haracterizes as de 1nil1hrd.s. But the record sho\,s that such a percentage of market share in nearly every area of the United States is regarded by A.B. as highly significant if favorable, and highly dangerous if it is a loss.

20. This pic.ture, counsel for the complaint contend, amply supports the eflect charges of the complaint. . Respondent's counsel, of course, contends the opposite. Their position boils down in reality to two points:

1. That the sales losses of eompetitors in the St. Louis market were caused by other factors than A. s price reductions-factors 1mconnected therewith, and that the required effect has not been Show11 as a matter of law.

2. That A. s price reductions were merely a meeting of the equally 10\\ prices of its competitors in good faith-that it. was in good faithsimply "testing the market" or "price experimenting" to find ans',ers to its loss of national oft' premise sales. 21. Before discussing these points some comment seems necessary on the basic charge in this case. Counsel seem to be solely preoccupied with the sites of injury-the St. Louis market-and to forget that the charge here is price discrimination and necessarily involving price. difl'erences bet~\een that. St. Louis market and a.ll other markets for A. s products. The cutting of its premium in the St. Louis market, and its subsequent elimination are not violations per se, they are violations only in comparison with the maintenance of higher ,, Findings 54 F.

prices elsewhere, whether premium or not, because such maintenance enables A.B. to continue profitable operation in more than 90% of its business to subsidize less profit or even no profit on its operations in the St. Louis market, and if competitor injury occurs there, violation of the charging law is prima facie made out. 22. Counsel supporting the complaint contend, of course, that the above statistical and market picture, together with the testimony of responsible officials of the three St. Louis brc"\yeries, attributing all or the major part of their substantial sales losses in the. eight months' period to A. s price. reducbon amply sustains the charge that the latter diverted business to A. , substantially lessened competition in the St. Louis market among these bre,,-ers, tended to create a monopoly in A.B. and injured, destroyed or preTented competition "ith A.B. The latter s counsel contend the negative of this factually and as a matter of la".

23. Factually they insist. and have proved that G.\V. had been progressively losing sales in the St. Louis market prior to 1954 that the. management had like"ise been maintaining a highly liquid cash position at the expense of rene."-al or replacement of productive facilities, that it sold out to Carling Brc,ying Company in October 1D54, at a price which reflected the good "will to bc about one-fifth of realizable net worth, and that. therefore it "-as not injured. Of course, good "ill being an intangible devends on many other things than sales potentiality alone. As to G. , respondent has sho"n that its sales too ere progre~:sin'ly declining in the St. Louis market from a share thereof in 1950 of 18% to 14.4% in 1953, that in ~larch 1954 , G.B. replaced the beer it had theretofore been selling with an entirely new product "which was badly named, poorly merchandised, bitter in taste and " ilc1" that is, "ith an unstabilizec1 air content, and offered the testimony of eleven saloon-keepers and storekeepers that this ne" beer "as disliked b:v the consumer, with the result that consumer sales thereof dropped sharply during the latter part of 1954, according to their testimony. ~one of this testimony "-as from retailers in the SL Louis market (which did and does seem most peculiar to me), but counsel assumes the same thing took place there-that the public taste ,yas the same, or that the product defects were the same. J-Ience. they claim G. s sales loss was its own fault, not that of A.

24. Re,spondent prepared and introduced in evidence a sales graph showing actual packaged-beer sales in the St. Louis ri1arket for itself and its three principal competitors there for the years 1952 , 54:, do"n to August 1955, and drew a "trend" line, ayeraged equated or weighted showing v,hat \\-oulc1 have been the, average ,, AJ.'l'HEUSER- BUSCH, INC. 289 277 Findings sales of each had no price upheaval taken place. This "trend" for 1954 and 1955 belies the contention that causes other than A. price reductions are the sole explanation for its competitors ' sales losses. According to it, G.",V. would have normally had, and in fact did have, in ~larch of 1954, a market share of 35% ; that absent price rapids, and based on the previous 27 months' performance, its share ould have decreased from 35% to 30.75% by February 1955. In fact, hm,ever, G.",V. sank precipitately to about 26% in July 1954 and never thereafter approached its projected trend until after the price increase in ~Iarch 1955. The same thing is true for G. although in less exaggerated fashion. There the losses ranged from about 3% below trend in July 1954, to about 6% below,y trend in February 1955. Furthermore, prior to the. June 1954 price reduction of A. , G. s largest sales decrease over the. same month or year previous had been 16.2%, but thereafter the comparable percentage loss ranged from a low of 30.5% to a high of 55.6%. The argument of counsel for respondent that the testimony of eleven retailers from outside the St. Louis market of their customers' dissatisfaction ,,~ith s new beer and the falling off in sales thereof for that reason was the real reason for G. s sales losses in the. Sf. Louis market rather than A. s price reductions, is refuted by a comparison of s sales losses as between the St. Louis market and the rest of its selling area. Thus exhibits show sales losses of G.B. in the St. Louis market for the last six months of 1954 at 38.44% of the Jast rest ofsix months of 1953 whereas a comparable figure for the s territory was only 19.32%. Comparable figures for the first six months of 1955 "-ere 45. 90% for the St. Louis market and 2DA9% for outside S1. Louis. The conc.lusion is that A. s price reductions in the St. Louis market were not the insignificant factor counsel but. steady salescontends, but greatly accelerated an existent slow decline in that area. of G.B. and G.",V. It is one. thing to descend several flights of stairs yourself; it is quite another to get thrown down the last flight by others. ~1urder is none the less murder even though the victim, medically, may not have long to live. 25. As to the third major St. Louis competitor, Falstaff, respondent seems to argue that because. it has eight breweries strategically located in six states, and was, prior to 1954, progressively selling more beer each year and only lost about 4% market share during s price reductions, no injury can be found, since Falstaff only had about 14.40/0 of its business in the St. Louis market. But this record abundantly shows that a much smaller percentage of business in any market is regarded as vastly important to A.B. ",Vhy then assume that 14.4%, 20% or 25% of total business are not vital to its 290 FEDERAL TRADE COMl\fISSION DECISIONS Findings 54 F.

competitors? It is significant that July of 1954 was the first month in 18 in which Falstaff showed a decrease in sales over the corresponding month of the previous year, and that decreases consistently continued throughout 1954, reaching a 32% loss in February of 1955. After A.B. again raised its price on :March 1, 1955, Falstaff' s interrupted upward march was resumed. The conservative sales estimates of Falstaff, projected for 1954 by Falstaff, as to what it expected for 1954, based on immediate past performance, show them far more than realized after A. s price reductions, with the exception of one month December 1954. Unlike G.B. and G.'V. , Falstaff is a picture of arrested and reversed progress, rather than acceleration of decline; but nevertheless fulfills the prescribed statutory requirement of efiect, just as fully, although perhaps not as vividly. Since these three brewers, excluding A. , account for the overwhelming volume of beer sold in the St. Louis market, the picture is one not only of injury to competitors but of injury to their line of commerce. As a factual matter, then, the finding is that A. s successive price reductions, which discriminated price-wise against its customers in other markets, did divert substantial business to A.B. from its competi tors in the St. Louis market; did substantially lessen their competition in their line of commerce, and did tend to create a monopoly, and had the potentialities to continue to do so. 26. Respondent contends, ho,,'ever that as a matter of law~ such finding cannot be made, and carefully reviews seven area price-discrimination eases, four by the courts, three by the Commission, which have dealt ",ith territorial price discriminations. Porto Rican A'lnerican Tobacco (/0. v. AmeJ'ica' n Tobacco (/0. 30 F. 2d 23~1; E. B. il11l11e'J' (/0. v. 142 F. 2d 511; illoore v. 111 earl' s Fine Bread (/0. 348 S. 115; 111 a:ryland Baking (/O1npany, F. T. C. Docket 6327; Balian Ice Cream Co. v. ATden Farms Co. 104 F. Supp., 231 F. 2d 356; P1l1' e;V Cm' , Ltd. F. T. C. Docket 6008; General Foods Corp. F. T. C. Docket 5675. Balian, Pm' , and General Foods were clismissed, no causal relationship between price discrimination or price differences and competitive injury being shown; the remainder resulted in orders to cease and desist or decrees or judgments. Respondents counsel contends these latter are no precedents because (a) they all involved a. single inj nree, whereas here there was more than one competitor in the area of reduction; (b) they all involved a demonstrated intent to eliminate that single competitor; (c) the price reduction was either below that of the intended eliminee, or below the eliminator s cost; and (d) the discrimination was continued long enough to cause serious injury to or destruction of the intended eliminee. I am unable to agree that the scope of the statute ANHEUSER-BUSCH, INC. 291 277 Findings is limited to injury to just one competitor. True, the resultant contraction of competition is clearer in such a situation, but the statute contemplates injury to the line of commerce in which respondent is engaged, and that is present here. All of s major competitors lost substantial business. Furthermore, there were a number smaller competitors involved in the General Foods case-that case was not dismissed because of that, but solely because the Commission found that instead of losing business, a number of them had gained. Intent to eliminate a competitor, not being required to be shown, is immaterial here. Undercutting, or selling below cost furnish a clearer picture of injury and predatory intent, but no case holds it to be a since q'Lla non of injury, actual or potential, or tendency to monopoly. Similarly, no case holds complete destruction of competitor necessary before injury is found-neither death nor mayhem are essential The facts here show a distinct probability of the one if not the other, if A. s price raid had continued longer, or indefinitely; and we are here concerned not only with actual injury but with potentia.! injury as well, and there is nothing in this record to show that what A.B. did in the St. Louis ma-rket, could not or would not be done by it, in the future, in other markets as well. Respondenfs reliance on quotes from the General Foods opinion is misplaced since the targets of the respondent's discriminations there "ere found to have gained business and not to have been injured, that. being the sole ground of dismissal. Furthermore, in line with those eases is the economic strength here of the respondent. A.B. ha-s total assets of more than twice those of its three St.. Louis brewery competitors and, selling nation-wide as it does, is able, although there is no proof that it did to use income or profit from the rest of its business to stabilize losses, if any, incurred in such a price raid. I repeat, there is no showing that it did, but the record shows it could-the potentiality is there. The fact that the St. Louis market produced only a small fraction of its total business is immaterial in the face of its over-all size and strength, but the fact that its St. Louis competitors were dependent on the St. Louis market for it substantial segment their business points up not only the size disparity but the extent of the injury.

27. Taking up now respondent' s second contention, it is true that lower prices to eonsumers is the goal of a free-enterprise system, but it must not be done so as to discriminate and benefit some customers at the expense of others, except under stipulated circumstances, such as meeting the equally low price of a competitor. As construed by the Supreme Court in O. v. E. Staley ill/g. 00. et aI , 324 S. 746 , Section 2 (b) places emphasis on "individual competitive Findings 54 F.

situations, rather than upon a general system of competition " and further, in Standard Oil Company v. 340 U.S. 231 , that wherever a la".fullower price of a competitor threatens to deprive a seller of a customer, the seller, to retain that customer, may in good faith meet that price.~' From these, proponent's counsel argue that since A. s price action was admittedly aggressive rather than defensive, its defense must fail. H.respondent's counsel rely on the Balian case cited above, which seems to reject this interpretation. But the factual setting in that case was markedly different. I believe there is a fair implication in Staley and Standard Oil, that Section 2(b) \vas intended not to absolve price discrimination for aggressive purposes but is limited to and available only to retain business. Such is not the case here. Instead of losing sales to competitors by reason of their lower prices, A.B. had been slowly but steadily gaining, prior to the price raid of 1054. Thus, from 1945 on it had shown, except for 1947, a consistent gain in its share of the St. Louis market from a low of 5.8% to 12.556 for 1053, and a comparable gain, of course, in absolute numbers of cases sold. l\Iarket rank had aclYanced from a very poor sixth to a clo~e fourth. There is nothing in this record to show, that although it was losing business nationally in the off-premise sales channel, that it was losing business in the St. Louis market or in any imminent danger of doing so. Secondly, these price reductions were ordered by its president for two admitted reasons: to get business a,,'ay from its competitors and to punish them for refusing to increase prices "hen A.B. dill so in the fall of 1953. Apparently the lesson was well taught and better learned, because those three St. Louis breweries promptly followed A.B. up with price increases in ~Ia.rch 1955, and were careful to keep the price difference between them and it at less than the 33 cents whose elimination had cost them so much sales volume. Thirdly, A.B. did not just meet, it beat competition. True, as counsel sarcastically comments, $2.35 equals $2.35 and not $2.30; but numerieal prices by themselves can be misleading because they can be superficial. A. s beer at $2.35 was in the same quantity as its competitors, and selling at the same dollars-and-cents ii.gure, but at $2.35 it "-as selling more value than its competitors were., by the ultimate test of any market-the consumer himself. ",Vhether it be called ': public acceptance" or "superior public acceptance " the consumer has proved, and A.B. is profiting thereby, that the former "ill, in most markets, pay more for Budweiser than it will for many other beers-clear proof that such consumer believes that he is getting more in quality, taste, effect or what not, from Budweiser than from others in the same product category for the same money. The ANHEUSER-BUSCH, INC. 293 277 Findings tremendous sales surge to Budweiser away from G. , G."'\V. , and Falstaff in the St. Louis market, after June 21, 1954, when the consumer could buy all of them at the same price, is dramatic evidence , 18of this. The statistical picture set out above in Paragraphs 17 and 19 a.lso shows that this switching to Budweiser, in the St. Louis market at least, starts at a premium of about 35~ a case of 24/12 oz. bottles. Below that spread consumers evidently think, in substantial numbers, whose substantiality increases as the spread decreases, that they are getting more, cent for cent, from Budweiser than they are from the beers of G. , G.'Y. , and Falstaff. Counsel cites Standard Oil Co. v. 233 F. 2d 649, as rejecting and "laying to rest" this reasonh1g. 'Vithout discussing whether the language does in fact fully reject, suffice it to say that that case is on appeal and not such reasoning is found in E. B.yet finally decided. Support for JIulle'i' cO Co. v. 2 F. 2d 511 , and in C. v. Sta:nda1Yl BnlTIJ.ls, Inc. 189 F. 2d 510, in neither of which was it expressly rejected, nnd in both of which it was an argued and briefed issue. N or do I believe that the Court's remarks thereon ,"ere "clumce. The finding on this point is that Budweiser has wide public acceptance geographically, and superior public acceptance in most markets not because it does or has sold more than regional or local beers in any given market, but in the sense that in most markets the consumer will pay a higher price for it than for local or regional competitive beers.

28. Respondent's counsel urge that A. s St. Louis price raid was price experimentation:' and ';testing the ma.rket" for the purpose of finding a solution to serious competitive and distributional problems and that this is evidence of its "good faith. These were: A. inability to match in every market the intensive advertising done there by local or regional brewers who were able to concentrate an scatter its shots entire budget in a small area, whereas A.B. had to oyer the nation; the freight disadvantage over local be.ers which had ; decen-no freight to be added, and regionals with less than A. tralization, by the. purchase of local breweries; and steady contraction of its principal channel of distribution-on-premise sale, which s sales na- accounteel for 60% of its distribution. Although A. the nation, its tionally and through all channels were the highest in been off-premise sales, particularly through grocery stores, had industry beer sa.Jes were steadily declining. 1Vhereas about 75% of ofl'- premise and the remainder on-premise, A. s ratio was almost conducted the reverse of the industry. To meet these problems, A.B. various survevs and field tests to determine market conditions, and sent out questionnaires to its distributors and wholesalers, asking Findings 54 F.

their remedial suggestions. Various solutions were considered; smaller size packages of Budweiser to sell at the same prices through off-premise outlets, particularly grocery stores; new beers to sell at or about, the same prices as competitors' local and regional beers; and expanded advertising and sales promotion. Sometime between the fall of 1953 and early in 1954 A. s management decided on a reduction in container size- 10 oz. cans or bottles in place of 12 oz. to sell at or near the price of competitive local and regional 12-oz. size; in other words, to sell less beer for the same price as more beer of others. Implementing this ,vas a long and tedious problem because of the tax warehousing, and production problems it raised and because of the many variant state regulations, some of which by law, fix beer container sizes, others of which, rest discretion in Alcoholic Beverage Control Board. The 25~ price reduction of J anuary 4, 1954, in the St. Louis market did produce inn'eased oftpremise as well as on-premise sales, but the results were considered by A.B. as not definitive, and the (Tune reduction was ordered. Counsel claims the spectacular results thereof made it clear to management that the solution lay in marketing the la-oz. container wherever possible, as against a 12-oz. competitive container, but also to bring out a new and cheaper beer. This latter was determined upon in the. fan of 1954 and placed on the market in JHarch of 1955 and proved a flop. Then A.B. brought out a still different cheaper beer under different rnerchandising techniques in August 1955, but the record does not show its degree of success. 29. On the above basis, counsel contend that A. s price reductions were to obtain market information with which.h to formulate a long-range marketing policy, and to "buy time" by '; competing on a price basis until such new long-range policies could be placed in effect " and conelusively establish A. s good faith. 30. In my opinion, however, the sales eonsiclerations which respondent alleges as the reasons for this "experiment " taken at full value, do not outweigh the contrary factors discussed in Paragraph 28 above. I cannot, ho"ever, take them at full value. The. "experimenf' clearly demonstrated that lcrwer prices on Budweiser was the answer to volume, both on-premise and ofi' premise; but obviously B. did not "ant that answer~ and certainly did not follow it. "anted an ans"er which would enable it to keep Budweiser up in price, above its competjtors, but still obtain more volume by other means-cheap per "fighting brancr' beer or less quantity for the same price, because that is what A.B. undertook and since has done. And it is inferable from the record that these two expedients were pretty well determined upon by or before June of 195~!. It is questionable "whether the June reduction was in fact a seeking of an answer, as ANHEUSER-BUSCH, INC. 295 277 Conclusions alleged. Furthermore, why an eight months' experiment when three months' trial produced, so far as the record goes, equally as good statistical sales results as the eight months? 31. The conclusory finding is that respondent's 1954 price reductions in the St. Louis market were not made in good faith to meet the equally low prices of competitors.

The order proposed by counsel in support of the complaint, after the usual injunction against discrimination, finishes ,,-ith "and 'where such lower prices reduce in any consequential amount the theretofore existing differential in price between respondent's product and the product of any of such other sellers, unless respondent reduces all prices in all areas by the same percentage. Entry of this order is refused because:

1. The key word "consequential" is vague and indefinite and, on the record, varies so from market to market as to have no meaning, hence would be impossible of compliance or enforcement. 2. The words "theretofore existing difi'erential': are likewise inc.capable, in many instances, of definite ascertainment, and therefore incapable of compliance or enforcement. This obviously means the higher price which respondent obtains in most markets for its beer over other beers, but there are beers which command a higher price than Budweiser in some markets. That spread, too, is a "theretofore existing differential"

3. The fact that different quantities have different difl'erentials whether "theretofore existing" or not, makes the order as submitted unworkable.

CONCLUSIONS OF LAW 1. To reduce prices in one area, while maintaining them in all other areas, is discrimination in price within the prohibition of Section 2 (a) of the Clayton Act, provided the required efi'acts follow therefrom, regardless of whether there is a uniform price or varying prices in the unchanged areas.

2. Accelerating an existing downward sales trend, or arresting and reversing an upward sales trend of competitors, is evidence of the required statutory effect. 3. Partial recovery from competitive injury suffered during a period of price discrimination, when the latter is abandoned or partially abandoned, does not excuse its employment. 4. The good faith requirement of Section 2(b) of the Clayton Act is not met where a price discrimination, with the required resultant competitive eflect, is for aggressive rather than defensive purposes. 5. The la"\v does not require that a competitor be put out of business completely or permanently, or irretrievably crippled, by a price Opinion 54 F.

discrimination before a finding of the prescribed competitive effect can be made.

ORDER t is ordered That the respondent, Anheuser-Busch, Inc. , a corporation, and its officers, representatives, agents and employees directly or through any corporate or other device, in the sale of beer of like grade and quality, do forthwith cease and desist from discriminating, directly or indirectly, in price, between different purchasers engaged in the same line of commerce, where either, or any, of the purchases involved in such discrimination are in commerce as "commerce" is defined in the Clayton Act, by a price reduction in any market where respondent is in competition with any other seller unless it proportionally reduces its prices everywhere for the same quantity of beer.

OPINION OF THE CO~Il\IISSION By T"\.IT, Commissioner:

The respondent in this proceeding is charged by the complaint with price. discrimination in violation of Section 2 (a) of the Clayton Act, as amended by the Hobinson-Patman Act (1;3 U. C. 13). Specifically, it is alleged that respondent in connection with the sale of beer made two successiye price reductions in the area of St. Louis County, ~1missouri, from its previously established regular premium price for that area, and that it made no similar price reductions in any other area. It is charged that by so doing respondent discriminated in price between different purchasers of its beer of like grade and quality with the eflect, among other things, of diverting substantial business from respondent's competitors to the respondent. The heating examiner, in an initial decision filed October 25, 1956 found that the allegations of the complaint were sustained by the record and ordered respondent to cease and desist such practices. Hesponclent has appealed from the initial decision. Respondent, Anheuser-Busch, Inc., a corporation organized, existing. and doing business under and by virtue of the la',s of the State of :JIissollri, with its principal place of business located in St. Louis 1 Section 2(a) lHoYides in !mrt as follows: "That it shall be unlawful for any person engaged in COIllIIH'rce. in thl' ('Ollr;;;e of S\lI:11 COllllllerCl' , either directly or indirectly, to discriminate in price bet,,-ecn different purchasers of commodities of like grade and (lnalit~., whl're either or any of the pllrchusf's ill"oIYCll ill such discrimination arc ill commerce, where such commodities arc sold for use. con~umption, or resale within the United States or all~- Territon" thereof or the Di!"trict of COllll11hia or an~" ins11lar po",~ession or other place 11ncler the juri!"diction of the United States, :1.!l(lwllcre the eft' ect of such discrimination may be s1JbstaJ1tially~' to lessen coll1lwtjt-jon or tend to create a llIonopol in any line of commerce, or to injure', destro~', or prt'\"pnt co:Jlpetition with an~- person who either grants or knowingly rcceiyes the benefit of such discriminatioll, or with CllS-tomers of either of them: 010 010010" :!__::::::____ :::::::::: ::::::::: :::::: ::::::::::::: ( . . ., A.lIliIEUSER- BUSCH, INC. 297 277 Opinion l\Iissouri, is primarily engaged in the manufacture, distribution and sale of alcoholic beverage beer under the brand names Budweiser and ~Iichelob. Respondent distributes and sells beer nationally. has plants located in St. Louis, :Missouri, Newark, New Jersey, and Los j\angeles, California, and is one of the nation s leading bre.wers. In some areas respondent sells its beer to wholesaler-distributors who resell it to licensed dealers and dispensers in their trade areas and in other areas, including that around St. Louis, respondent sells directly to liquor stores, chain grocery stores, bars, and other outlets generally termed "retailers. Approximately 25% of respondent's beer sales are made through its branch operations, while sales to ,,'wholesaler- distriblltors account for the remaining 75%. In the beer industry there is a wide dispersal of manufacturing facilities clue mainly to high shipping costs relative to unit value. Thus, there is found throughout the country many beers of local or regional geographic distribution. A few brewers sell beer in every state or nearly every state. These are the so-called "national" beer shipping companies, and include Blatz, ~liller, Pabst, and Schlitz of )lihraukee, 'Yisconsin, as well as Anheuser-Busch, the respondent. Throughout the country, respondent's product, Buchreiser, is generally sold at some higher price than beel's of local or regional distribution. 'Yhile there is no uniform or constant (lifl'erentinl, in the great majority of markets Budweiser is priced over its regional or local competition. This is established in the record by various survevs. the results of ",which are corroborated bv the testimony of both retail and competitor ",,'itnes:ses. ::Uoreover, respondent itself has advertised Buchveiser as a premium prices1 beer. As an example it '"as advertised as "the same Buc1",,' eiser that still sells at the premium prices around the. world.

In the St. Louis area, responclenfs principal competitors are thrpe regional brewers: Fa Jstnff Brewing Corporation, Grieseclieck 'Vestern Brewing Company, and Griesedieck Brothers Ble",,-ery Comp~my (hereinafter referred to as Falstaff, G.",V. and G. , respectively). Prior to 1954, these competitors sold beer in the St. Louis area. at prices substantially less than the price of Budweiser. The pric.es of 2 Anlleuscr-Bu,clJ' s nation:1! rank H),');! to 195~1 js ShOI\'11 by the following tab1L': Total paid lax -\ nlWllSPr- Percentage ::\:1(ional ithdrnWitJs Bmc l!ross of tot.:d rank 'C. 5'11('5 ---;:nm In, ! 8.1, 83fi 480 , Ii. 03.J , 44.'1 J!)5:L ------------ 8C. t~. JJ6! ~1 il1 3~:2 7. S 83, 3~, , 4~~ a. 825. , (,0 t. i;;~i, fJ,.J, Ii;, . J (i'J I n. G) I __ _ Opinion 54 F.

the regional competing beers were in each instance $2.35 per case. Respondent' s price was $2.93 per ease, a differential of 58. R(3spondent first reduced its price on January 4, 1954 , to $2.68 per case leaving a new differential of 33. Thereafter, on June 21 , 1954 respondent again reduced its price, this time to $2.35 per case, at which price it was exactly matching the prices of its regional competitors. The following table indicates the complete price changes made in St. Louis by the respondent in this period: Net to Retailer December January 4, June 21, 1954 31, 1953 19.

BOTTLES 24/12 oz. Ref. Regm - - 24/12 oz. ~ . R. Reg-- u-- ---- - -- 3. 1fI 24/12 oz. "'. R. 416-- - u --- u-- 3. 1fi 12/3207.. Rrt. Reg___ 2~ 96 12/32 oz. N. IL Reg--- ---- --- -- - ----- n ------ --- 36/7 oz. Rel - ---- --- -- - - -------- ---- --- -- _h___u- CA !\S 12/12 oz. . - - - - - -- -- -- _n _u - - - -- -- ----- --- -- -- -- ---- _u- -- -_u- 1. 67 1. 60 1. 51 48/12 oz, 8/G- ----------------------------------------------_u- 24/12 oz. Regn_ -- --- _---_-h - ---_u- _u- -- ------ DRA UGHT Bud weiser - - - - 12. 12. 12. :!\lichelob- -- - - ------ _-on - _--h_____u -- - - u_- 13. 13. 13. On January 3, 1954, respondent was selling standard 24/12 ounce cases of regular returnable bottles from its branches net to the retailer at the following prices:

St. Louis, Mo. ---- ------------ $2.93 'Yashington, D, c. ------------- $3. Chicago, Ill. 3.44 Detroit, l\lich, ---------------- 3. Cincinnati, Ohio -------------- 3.75 Boston, ::\lnss. ---------------- 3. Houston, Texas --------------- 3.70 Kansas City, Mo. ------------- 3, Bronx, Ne"- York ------------- 3.68 St, Paul, Minn. --------------- 3. Kearney, Nebr. --------------- 3.68 Sioux Falls, S. Dak. ---------- 3. St. .Joseph, Mo. --------------- 3,17 Denver, Colo. Buffalo, N.Y. ----------------- 3.60 San Francisco, Calif. ---------- 3. Baltimore, 1\1c1, --------------- 3.62 Lus Angeles, Calif, _n--_____-- 3. Respondent, however, made no price reductions anywhere else in the United States similar to those made in the St. Louis area. As a result of maintaining higher prices to all purchasers outside of the St. Louis area and charging the lower prices, as reduced in 195.:1, to only those customers in the St. Louis area, respondent discriminated in price as between purchasers differently located. The price reductions of 1954 remained in effect until :March, 1955 at ,,-which time respondent increased its price 451t per case. Its new J Ca:-e. as u"ed hercil1lU11ess otherwise indicated, rders to the :-tandard case of 24 12-ounce regular returnable bettIes, , ANHEUSER- BUSCH, . INC. 299 277 Opinion higher price was then $2.80 per case. Falstaff, G.B. and G.\V. almost immediately increased prices to $2.50 per case, or 15~ over their prior prices. This resulted in a new differential of 30~ per case. . One of the principal issues raised on this appeal is whether or not r.respondent's price reductions in 1954, resulting in discriminations in price between purchasers ere such as to have an injurious effect on competition within the meaning of Section 2(a). The hearing examiner found that respondent's price discriminations had the effect of diverting substantial business to Anheuser-Busch from its competitors in the St. Louis market; the effect of substantially lessening competition in the line of commerce in which Anheuser- Busch and its local competitors are engaged; and the further effect- - of tending to create a monopoly and having the potentialities to continue to do so.

Prior to the price reduction by respondent in January, 1954 G. "'V. was the leading seller in the St. Louis market followed by Falstaff, G. B. and Anheuser-Dusch. Immediately thereafter, respondent rose to third in volume of sales and G.B. dropped to fourth. Following the June, 1954 , price reduction, .LL\..nheuser-Busch became the leading sellrr in the area with Falstaft' second, G.\". third and B. fourth. Respondent held its first place position in the market throughout the eight months of the full price reduction, from July, 1954, through February, 1955. During this period, the total market sales increased only about 9.2% as against the same period for 1953- , while respondent, comparing its sales for the same periods enjoyed an increase of 201.5%, a tripling of sales. On the other hand, Falstaff, G. B. and G. "'V. during the period of the price reductions lost in their volumes of sale as well as their respechve shares of the total market in the St. Louis area. The losses of G. find G .\Y. were particularly large. Com paring the eight months of the full reduction ,with the same prior period, G. s sales ,were cut by about 41 % and G.\V. s about one-third. In the following table the gains made by the respondent are compared with the losses incurred by its major competition in the St. Louis market: SALES IN STA TISTICAL CASES .Tuly 1953-Feu. .July 1954- Ftb.

1954 955 Anheuser-BusclL -- - - , 121 , 065 , 380, 648 Falstaff - - -- , 601 , 6G5 560, 1-1- Grieseclieck Brothers- - -- - - - , 152 , 3G\J G7~~, H;; G rieseclieek Western - - 074 537 , 065 , :33;") All Others_- -- 448, 134 490 008 Total 1\1 ar kel - 307 770 , 174 , 27~ 4 A statigtic:al case means the cQui\"ulem of the standard 2~/12 oz. cast'. 52S5ii-GO- Opinion 54 F.

The relative positions of the various competitors in the St. Louis market around the time of respondent's price reductions in 1954, as xpressed in shares of the total market, may be sho.wn as follows: Dec. 31, 19531 June 3D, 1954 March 1. 1955 July 31, 1955 Bun- - n - n ---- - - - - _n - - - - _n- - - - 12. 16. 39. 21. 03 G ,B - - - - uu -- n n -- --- - n- - n- - -- - _n -- n - n -- 14. 12. Fl1lstafL hn -- --- n u -- - - -- n n n - - n- - - n - - n- 29. 32. 29. I 36. G. \y - - - - n _nn- - - n- -- - u--- - n n n - - - - n n-_- 38. (J 23. I 2i. i8 All Others - - - - _n - n -- - __n - - n- - - - - n n - - n --- B. and G.\V. had been having progressively less sales volume in the St. Louis market for several years prior to the price reductions by respondent, and thus it is reasonable to expect that their sales under ordinary circumstances would have continued downward at about the same rates. The trends of their losses, hmvever, do not indicate that their sales reverses in the 1954- 5;'5 period would have been anywhere nearly as severe if respondent had not so sharply reduced its prices. Falstaff', on the other hanel, had been showing progressive gains in sales prior to the period of the price reductions and according to this trend but for the reductions, Falstaft' would not have lost sales, as it did, but would have shmvn a substantial ll1crease.

Taking into account all of the factors which may have afI'ected the sales of the various competitors in the St. Louis market, it is evident that only respondent's price reductions could have had such a ge.neral adverse efi'ec.t on the market.. No other circumstance will account for the fact. that, while respondent more than tripled its sales, most of its competition sufi'ered such serious declines. This almost speaks for itself. Respondent's gains could only hit ve been made at the expense of competition since the total sales in the St. Louis market did not increase by any such substantial amount as the sales of respondent and the small combined increase in sales by all of the other competitors could not begin to account for the losses experienced by Falstaff, G.B. and G.\V. Respondent's price discriminations manifestly resulted in a substantial diversion of sales from competitors to itself. The gravity of the e.flect of the~ sales losses on these competitors is readily apparent. from the sho,,-ing that the St. Louis market accounted for 14% of Falstaff' s sales 2~S0 of G. s and 25% of G.",V. s. J\Ioreover, in connection with the efiect on competition respondent' s relative size in the beer industry cannot be disregarded. In 1953: the total sales of Budweiser of 6 711 222 barrels was in excess of even the combined total sales of its three leading St. Louis competitors. Their total sales in 1953 were as follmys: FalstaiT 911 393 barrels, G.\V. 1 483 631 barrels, G.B. 778 142 barrels. . _) ) . . . .

ANHEUSER-BUSCH, INC. 301 277 Opinion Clearly respondent's discriminations in price had the effect of substantially lessening competition in the line of commerce in which Anheuser-Busch, Falstafl', G.B. and G.",V. are engaged. ",Ve believe that the hearing examiner s findings in respect to competitive injury are amply supported by the record and free of error. Hespondenfs next contention in this appeal is that it is entitled to a finding that its price reductions were made in good faith to meet the equally low price of a competitor within the meaning of Section 2(b) of the Clayton Act, as amended.5 On the basis of the record in this case, we cannot agree.

The justification provided by Section 2 (b) for discrimination in price contrary to the provisions of Section 2 (a ) is essentially a right of self- defense against competitive price attacks. Standard Oil OOL , t) Tiu. 0 .

In this instance, respondents purpose could not have been to profeet its sales volume in the St. Louis market against an invasion by competitors. Its sales and share of the total market had been steadily increasing. None of the competitors constituted any threat at that time to respondent's relative position in the St. Louis market. In fact; the sales of two of its major competitors had been on the clown grade for some time. Respondent argues that, while not losing sales in the St. Louis area, it had been having decreases in sales volume in other markets served by its St. Louis plant. This, however, would not justify the lowering of prices in the one market in which respondent had experienced no losses. The emphasis of Section 2 (b) is on individual competitive situations rather than upon a general system of competition. C. v. A. E. Sta Zey ill/g. 00. 324 U.S. 746. If respondent was faced with an individual competitive situation which it had to meet, it clearly was not in the St.. Louis area. l-Ioweyer more advantageous it may have been for respondent to lmver its prices there, by so doing it has no defense under 2 (b).

Prior to the price reductions of 1954, Budweiser was sold at a considerably higher price in St. Louis than most of its competition and not only retained but steadily improved its sales volume in that market. After the price increases of :J\Iarch 1955, when there was 5 Section 2 (b) proYiues as follows:

( b) Upon proof being made, a t any hearing on a compla int under their sect ion, that tJwre hns been c1iscriminntion in price or services or facilities furnished. the burden of rebutting the prima facie case thus made by showing justification shall be upon the person charge(l with a yioJatioIJ of this section, and 1mJes;,: justification shall he affirmatively shown, the Commission is authorized to issue an ordel' terminating the diserimination: Prodded, lid/cere!" Thnr nothing herein contnine(l state preyent n ~enter n'butring the prima facie .ease thus made by showing that Jlis Jo,yer price or the furnishing of scl' icl~8 or facilities to nlJ~' purchaser or purchasers ,,"as made ill good faitll to meet equnJJy Jow price of a competitor, 01' the services or faciJitif'8 furnished by a comlletitor. , ..

Opinion 54 F, again a differential in price between Budweiser and the refTional beers in St. Louis, respondent's product continued to sell at ~ volume greater than that in the years prior to the price reductions. It is evident that Budwe.iser could and did successfully command a premium price in the St. Louis market as it has in most of the other markets in the nation. The test in such a case is not necessarily a difference in quality but the fact that the public is willing to buy the product at a higher price in a normal market. Clearly, therefore, respondent's reduction from the premium price to match the prices of the regional beers on the market was not a meeting of competition. The efiect was to undercut competition. The huge gains \which respondent made at the lower prices testifies to that fact. Under the circumstances, respondent cannot justly claim that it was meeting competition.

Considering aU the factors we conclude that the hearing examiner was warranted in finding that respondents 1954 price reductions in the St. Louis market were not made in good faith to meet the equally low prices of competitors.

FinaUy, on this appeal, respondent contests the appropriateness of the order contained in the initial dpcision. It contends, for one thing, that since all the findings as t.o jnJury relate to the St. Louis market, the only lawful order which can be entered is one confined to that market. There is no merit in this. .As to territorial extent a respondent having been found guilty of a violation of the Act. may properly be required to cease and desist such practices in all areas in which it is doing business. The ill (lJ'yla71.d Balt'in,rl Co-m.p(my 243 F. 2cl 716.

Respondent also argues that the order requires a. uniform percentage. reduction in all markets. Such an order: it is asserted, is divorced from the realities of be.er pricing. The point is made that since differentials 'Vary from market to market, a price reduction might actually result under the order in bringing the. price of Bndweiser in a. great many markets below that of the regional beer. This argument assumes that every price reduction necessitates 1'('.dncbons everywhere. In fact, the order does not preclude l'e~pondent from differentiating in price in a new competitive situation involving different circumstances where it can justify the discrimination in nceordanee with the statutory provisos. ~ 01' is the respondent precluded under the order, if the circumstances are not substantially similar, from lowering its price in good faith to meet v. Ruberoid Compa. ny,an equally low price of a competitor. C. 343 U. S. 470.

,, ANHEUSER-BUSCH . INC. 303 277 Order Respondent also comments in its brief that this is an extraordinary Robinson-Patman Act order in that, unlike the usual order requiring uniform prices, it allegedly requires Anheuser-Busch to charge different prices in different markets in perpetuity. As indicated above the order does not necessarily require diiferences in price hereafter since the statutory proyisos are implicit in the order. :Moreover since the order is directed to discriminations in price, there is nothing therein to prevent respondent from charging all of its purchasers the same or uniform prices if it so chooses. On the other hand, if the order was worded so as to require respondent to maintain uniform prices this, if anything, would be contrary to market. realities. Hesponclenfs prices vary in the diflerent markets in which it sells resulting in differences which, with the exception of the price cliscriminations charged in the complaint, are not in issue in this proceeding. This order, ,vhile in efiect permitting the continuation of these price clifl'erences, serves to prevent disproportionate price reductions Ol' discriminations in price beyond the established difl'erfO1111d toences among markets, such as the price discriminations app;.'opriate in theunlawful. The form of the order is entirely eircumstanees. The order should be modified, howe" , so that it in be dear its application extends only to prices charged to purchasers en~'nted in the same line of commerce. Also we have into avoidserted the term "proportionally " in Jieu of "percentage" possible rigidity of interpretation.

Respondents appeal is denied. It is directed that the order contained in the initial decision be modified in accordance with the views herein expressed.

Commissioners Anderson and ICern did not participate in the decision herein.

FIN AL ORDER This matter having been heard by the Commission upon respondenfs appeal from the hearing examiner s initial decision, and upon briefs and oral argument in support thereof and in opposition thereto; and The Commission having c1eterminect for the. reasons appearing in the necompanying opinion, that respondents appeal should be denied initial decision shollhl beand that the order contained in the moclifiec1 :

It is ordered That the order contained in the initial decision l)e and it hereby is, modified to read as follmvs: It is ordered That the respondent, Anheuser-Busch, Inc.; a corporation, nncl its officers: representatives, agents and employe.es, directly Order 54 F.

or through any corporate or other device, in the sale of beer of like grade and quality, do forthwith cease and desist from discriminating, directly or indirectly, in price, between different purchasers engaged in the same line of commerce, where either, or any, of the purchases involved in such discrimination are in commerce, as "commerce" is defined in the Clayton Act, by a price reduction in any market where respondent is in competition with any other seller, unless it proportionally reduces its prices everywhere for the same quantity of beer. It is f'll/l,ther ordered That the findings, conclusions, and order as modified, contained in the initial decision, be, and they hereby are, adopted as those of the Commission.

t is fw,that onle1'ed That the respondent, Anheuser-Busch, Inc. shall, within sixty (60) days after service upon it of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which it has complied with the order contained in the initial decision, as modified. Commissioners Anderson and ICern not participating. VELOX SERVICE, INC. ET AL. 305 Decision