United States v. New York Great Atlantic & Pacific Tea Co.

Rule of Law:

A large, integrated retail food chain's systematic abuse of its immense buying and selling power to coerce suppliers into providing preferential prices and other advantages, thereby disadvantaging competitors and creating a two-price level, constitutes a conspiracy to restrain and monopolize trade in violation of Sections 1 and 2 of the Sherman Act.

Facts:

• The A&P system operated 5,800 retail stores in forty states and was vertically and horizontally integrated, acting as a buyer, manufacturer, processor, broker, and retailer in the food industry.
• Ultimate control of buying for the entire A&P system was centralized in its headquarters, allowing it to dictate buying policy and merchandise purchase prices for all its operations.
• As early as about 1925, A&P began sending its own buyers into the field to purchase merchandise directly, compelling suppliers to pay A&P a seller's brokerage fee, a practice that continued until made illegal by the Robinson-Patman Act in 1936.
• After 1936, A&P buyers induced suppliers to reduce prices by the amount of previous brokerage fees ('net buying'), and later adopted a 'direct buying' policy, refusing to buy from or sell to suppliers who used brokers, thereby affecting the business of brokers and direct customers.
• A&P buyers coerced suppliers into selling at lower prices than to competitors, often threatening blacklisting or entering the manufacturing business if preferential terms were not met, resulting in substantial preferential discounts and advertising/bag/label allowances unrelated to cost savings or actual services rendered.
• A&P used its wholly-owned subsidiary, Atlantic Commission Company (ACCO), to buy fresh produce for A&P and also to act as a selling and buying broker for other traders, leveraging its dominant position to secure lower prices and higher quality for A&P while charging higher prices and providing lower quality to competitors through tactics like 'cash buying' and 'sales arrival' purchases.
• A&P utilized its accumulated profits and allowances from its buying and manufacturing operations to subsidize retail prices in competitive areas, sometimes selling goods below cost, and offset these losses by maintaining higher prices in less competitive regions.
• Carl Byoir, A&P's public relations counsel, and his company, Business Organization, Inc., were intimately familiar with A&P's anti-competitive policies and actively participated in furthering its objectives, including the formation and direction of 'Super-Coop' to control fruit and vegetable shippers.

Procedural Posture:

• The United States government initiated a criminal case against The New York Great Atlantic & Pacific Tea Company, Inc. (A&P), several of its subsidiary and affiliated companies, certain officers of A&P, Carl Byoir, and Business Organization, Inc., in the Eastern District of Illinois.
• The District Court, sitting without a jury, found A&P, its subsidiaries, officers, Carl Byoir, and Business Organization, Inc. guilty of a conspiracy to restrain and monopolize trade in violation of Sections 1 and 2 of the Sherman Act.
• The defendants (except Byoir and Business Organization, Inc.) filed a motion for acquittal at the conclusion of all the evidence, which the District Court denied.
• All convicted defendants appealed the District Court's finding of guilt to the United States Court of Appeals for the Seventh Circuit.