The opinion of the court was delivered by: CARTER
This is an antitrust case concerning alleged monopolization of the concrete subcontracting trade in four boroughs of New York City. The charges include violations of the Sherman Act §§ 1 & 2 (15 U.S.C. §§ 1 & 2) and the Clayton Act as amended by the Robinson-Patman Act §§ 2(a), 2(f) & 7 (15 U.S.C. §§ 13(a), 13(f), & 18). Plaintiffs are three corporations suing individually and as members of a joint venture (collectively referred to as "Nasso"). Defendants also include three corporations sued individually and as members of a joint venture (collectively referred to as "DIC-Underhill"). The other defendants are named individuals said to be in control of the joint venture and an additional corporation, Certified Industries ("Certified"), said to be controlled by the named individuals or the joint venture. Nasso seeks treble damages under 15 U.S.C. § 15, injunctive relief under 15 U.S.C. § 28, and an order of divestiture. Defendants now move to dismiss certain portions of the complaint.
Plaintiff corporations perform concrete work on large construction projects in Manhattan, the Bronx, Brooklyn, and Queens. They banded together to form Nasso in May, 1975, purportedly in a futile effort to counteract the market power amassed by DIC-Underhill. Defendant subcontractors are competitors who, under the guidance of the named individuals (controlling stockholders, officers, and directors) formed DIC-Underhill in 1964. Thereafter, in 1973, DIC-Underhill and/or the individual defendants acquired control of Certified, one of the two suppliers of building materials in this area capable of meeting their substantial requirements. Since that time, Nasso has been unable to secure any significant contracts, and DIC-Underhill presently controls 80% Of the relevant market.
The combination into DIC-Underhill and the subsequent acquisition of Certified are alleged to violate the proscription embodied in the Clayton Act § 7 against mergers that tend to promote monopoly. Defendants are also alleged to have misused their control of Certified by manipulating the price of concrete materials so as to discriminate against Nasso in contravention of Robinson-Patman Act §§ 2(a) & 2(f). Finally, Nasso contends that DIC-Underhill has abused its pre-eminent market position by posting performance bonds for building projects on which it has applied for the concrete subcontract in exchange for which the prime contractor awards it the job without soliciting competitive bids. This procedure, along with the more specific antitrust violations, is cited as evidence of defendants' illegal conspiracy to monopolize and restrain trade in violation of Sherman Act §§ 1 & 2.
Defendants first move to dismiss the price discrimination claims because Nasso, having never purchased or attempted to purchase concrete supplies from Certified, has no standing to sue. Initially, standing to sue under §§ 2(a) & 2(f) was limited to actual purchasers from the alleged price discriminator. See, e.g., Klein v. Lionel Corp., 237 F.2d 13, 14 (3rd Cir. 1956). Nasso freely admits that it never bought or attempted to buy concrete materials from Certified and that it does not have standing as a direct purchaser. Later decisions, however, have approved suits by indirect purchasers from the price discriminator, and it is under this rubric that Nasso asserts standing to sue DIC-Underhill.
The indirect purchaser doctrine was developed by the courts in response to price discriminators shielding themselves from suit by charging disparate prices through middlemen. In American News Co. v. F.T.C., 300 F.2d 104 (2d Cir.), Cert. denied, 371 U.S. 824, 83 S. Ct. 44, 9 L. Ed. 2d 64 (1962), the court permitted buyers discriminated against through the agency of a middleman to sue the original seller if it had dealt directly with the buyer and if it had indeed controlled the terms of the sale. Thus, the price discriminator could not escape liability by interposing a wholesaler between itself and the victim of the illegal charges.
While approving the indirect purchaser doctrine in F.T.C. v. Fred Meyer, Inc., 390 U.S. 341, 88 S. Ct. 904, 19 L. Ed. 2d 1222 (1968), the Supreme Court also expanded its reach. The Court there permitted an indirect purchaser injured by a manufacturer's policy of granting discounts to large retailers with which it dealt directly to sue the manufacturer even where:
1. the indirect purchaser had not had direct dealings with the manufacturer, and
2. it was not clear that the manufacturer had control over the terms of the sale from the wholesaler to the indirect purchaser.
So long as the manufacturer adopted a pricing structure that favored a direct purchaser, a competing, disfavored indirect purchaser had standing to sue the manufacturer. F.T.C. v. Fred Meyer, Inc., supra, 390 U.S. 354, 88 S. Ct. 904. The Supreme Court based its expansive holding on a finding that " "customers' in § 2(d) includes retailers who buy through wholesalers and compete with a direct buyer in the resale of the supplier's product." Id. at 354, 88 S. Ct. at 911. Although the decision was rendered only under § 2(d), the rationale applies equally to §§ 2(a) & 2(f). Checker Motors Corporation v. Chrysler Corporation, 283 F. Supp. 876, 888 (S.D.N.Y.1968) (Pollack, J.) (in a suit under § 2(a), direct dealing and control requirements need not be met where the defendant engaged in direct sales to favored purchaser); Callman, The Law of Unfair Competition, Trademarks, and Monopolies § 28.1(f) (3rd Ed. 1969) (Court moving toward allowing all indirect purchasers to sue manufacturers who "knowingly permit" sale of products at discriminatory prices). Since Certified sold directly to DIC-Underhill, the alleged favored purchaser, the test of F.T.C. v. Fred Meyer, Inc. applies and Nasso need not meet the "control" and "direct dealings" requirements.
Nasso has not succeeded in showing that it falls within the class of indirect purchasers currently protected by the rule of F.T.C. v. Fred Meyer, supra. In that case, as in all prior cases, the Court required that the indirect purchaser compete with a favored retailer in the sale of the supplier's products. In the instant case, however, Nasso never purchased or attempted to purchase Certified's concrete materials at any point in the distributive chain. Instead, it dealt exclusively with its own supplier, Transit-Mix Concrete Corp. ("Transit-Mix"). Thus, Nasso admits to being neither a direct nor an indirect purchaser of Certified's products.
Undaunted, Nasso argues that it is nonetheless entitled to sue Certified because Certified realized its pricing policy through Transit-Mix, which functioned as its unwitting agent. Under those circumstances, Nasso claims status as an indirect purchaser because it buys the same product sold by Certified and is adversely affected by Certified's pricing policy. It should not matter, Nasso contends, that Transit-Mix is not a wholesaler of Certified's products so long as it serves as the "middleman" in Certified's scheme.
The substance of Nasso's charge is that Certified deliberately raised its prices with the knowledge that Transit-Mix would follow suit. While Transit-Mix was charging Nasso the higher price, Certified was sharing the additional profits with DIC-Underhill so that the effective price charged to DIC-Underhill was less than that charged to Nasso by Transit-Mix. The ultimate effect of Certified's charging unequal prices "through" Transit-Mix, of course, was to give DIC-Underhill a competitive advantage in bidding for subcontracts against Nasso.
Although Nasso's ingenuity merits recognition, it seems to the court that its argument stretches the indirect purchaser doctrine beyond its appropriate scope. In substance, Nasso seeks to litigate, under the rubric of price discrimination, injuries that should be contested under other sections of the antitrust laws. Defendant's vertical integration and alleged anti-competitive plan can be and, indeed, are being challenged under Clayton Act § 7 and Sherman Act §§ 1 & 2. It is quite doubtful, however, that the cost ...