Adolph Coors Company v. Federal Trade Commission

497 F.2d 1178, 30 A.L.R. Fed. 1, 1974 U.S. App. LEXIS 8324
CourtCourt of Appeals for the Tenth Circuit
DecidedJune 4, 1974
Docket73-1567
StatusPublished
Cited by60 cases

This text of 497 F.2d 1178 (Adolph Coors Company v. Federal Trade Commission) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Adolph Coors Company v. Federal Trade Commission, 497 F.2d 1178, 30 A.L.R. Fed. 1, 1974 U.S. App. LEXIS 8324 (10th Cir. 1974).

Opinions

BARRETT, Circuit Judge.

Adolph Coors Company appeals an Order to Cease and Desist issued by the Federal Trade Commission. The FTC filed a complaint alleging that Coors was engaged in anticompetitive practices in violation of Section 5 of the Federal Trade Commission Act.1 An Initial Decision was issued by the Administrative Law Judge after hearings were conducted in Denver , extending over a period of thirty days. The Law Judge found that Coors had not violated the Act. He recommended that the complaint be dismissed. The FTC appealed the Initial Decision to the five-member Federal Trade Commission. The Commission substituted its findings for those of the Law Judge and found, as a matter of [1181]*1181law, that Coors had violated Section 5 of the Act.2

Adolph Coors Company, a Colorado corporation, is engaged in brewing, dis[1182]*1182tribution and sale of beer, using the trade name of “Coors”. Coors has one brewery in Golden, Colorado, and distributes its beer in an eleven-state area. The beer is sold to the distributors who in turn sell to retailers. While Coors is the fourth largest beer brewer in the United States, it alone among the nation’s some 70 brewers is a “shipping” brewery, i. e., Coors ships all of the beer brewed at its single “regional” brewing plant at Golden, Colorado, F.O. B. to the various distributors in Arizona, California, Colorado, Idaho, Kansas, Nevada, New Mexico, Oklahoma, Texas (some counties only), Utah and Wyoming. In 1971 the average barrel of Coors beer traveled 961 miles to its market place.

The beer is made by the aseptic brewing process which requires refrigerated marketing. It is uncontroverted that Coors beer is substantially more expensive than any other beer consumed in the United States, and yet because of its popularity, Coors has climbed from the 49th largest brewery in 1948 to its number 4 position today. Coors maintains market leadership in total sales against all competitors except in its territory served in Texas. Because of the delicacy of the product, it is essential that the refrigeration controls and expeditious marketing techniques be strictly monitored. Once the beer is delivered to the distributors, this obligation is assumed by them under an agreement with Coors. It is the distributor who is required to protect the “integrity” of the Coors beer quality by guarding against a retailer’s failure to rotate the beer, and failure to insure proper refrigerated storage. Coors beer retained over 90 days must be destroyed.

Coors has 35 area representatives to help market the product. Each representative is assigned certain distributors to work with and to see that Coors’ Policy Manual is followed. The price Coors charges to its distributors is set by Coors. Coors suggests to its distributors and retailers the price at which to sell its beer.

Each distributor is assigned a territory in which to market Coors’ products. Coors may reduce the territory or add distributors to a particular territory. There are 166 independent distributors and one wholly owned subsidiary company.

In 1964 Coors eliminated sales to central warehouse accounts. Central warehouse accounts are either retailers such as large chain supermarkets who buy for redelivery to their own outlets, or independents who purchase for redelivery to nonaffiliated retail outlets or retailer warehouses.

Coors favors draught accounts. It has a draught policy in which tavern owners are given 30 days to discontinue handling other brands of light draught beer. If the owner-retailer continues to sell another brand of light draught beer, Coors discontinues its supply of light draught beer to the tavern.

The contract between Coors and the distributors enables Coors to cancel its contract for any breach by the distributor, with a five-day notice. Either Coors or the distributor may cancel the contract without cause with a 30-day notice.

Coors contends that: (1) it did not engage in wholesale or retail price fixing; (2) its vertically imposed territories are reasonable and legal; (3) it has no policy of requiring exclusive draught accounts; (4) it has the right to protect its quality product and not distribute its beer through central warehousing; (5) [1183]*1183its contract termination rights are reasonable and legal; (6) the provisions of the Commission’s Order are not supported by substantial evidence, are not reasonable, and are in conflict with important public policies; (7) the FTC internal procedures have prejudiced its right to a fair hearing; and (8) this court must exercise its power and set aside the Commissioner’s Order.

I.

Coors contends that it did not engage in price fixing agreements with its distributors. Its practices are set out in the Coors Policy Manual which states as follows:

In order to maintain a successful wholesale or retail business, pricing integrity is essential. Pricing integrity will result in an adequate and equitable profit to both Distributor and retailer and is fair to the ultimate consumer.
It is the policy of the Adolph Coors Company to suggest, if it so chooses, to either the wholesaler or retailer level, suggested minimum pricing. We reserve the right to further that policy by simply refusing to deal with anyone who doesn’t adhere to said policy.
The Adolph Coors Company and its agents must only state the policy. They cannot make agreements, threaten, coerce, or intimidate wholesalers or retailers in any manner. They can enforce the policy only by reserving the right to refuse to deal with those who don’t adhere to the suggested prices.

Coors’ sales manager, Harvey Gorman, testified that the product is controlled by agreeing individually with each distributor. This policy is enforced by a provision in the contract between Coors and the distributor enabling Coors to terminate a distributorship in 30 days without cause. Since there are about 7,000 applicants for distributorships, any distributor who does not conform to Coors’ pricing policies could readily be replaced. Coors’ area representatives constantly obtain wholesale price information and send the information to the home office in Golden. The area representatives also resolve any conflicts between the prices proposed by a distributor and those suggested by Coors.

John Hemphill, a former Coors distributor, testified that he would only go so far in making a request to use his own prices, knowing that Coors could terminate him in 30 days. He also testified that a Coors’ area representative told him that the best thing for him to do is not to be a distributor if he could not agree to Coors’ policies on pricing and territories. The Law Judge had questioned Hemphill’s credibility because of a suit he has pending against Coors, but the Commissioners rejected this fact as bearing on the issue of credibility.

Jay Wagnon, a Coors’ distributor, testified that Coors insisted on controlling distributor price increases and that when he refused to adopt wholesale prices suggested by the Coors’ area representative he was summoned to Golden and requested to change his prices. He stated that Coors’ personnel told him to bring his prices in line with Coors’ recommendations or they could put another distributor in his area. He testified that he was afraid; that he had been threatened; and that he therefore conformed to the suggested prices. The Law Judge did not find Wagnon’s testimony credible.

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Bluebook (online)
497 F.2d 1178, 30 A.L.R. Fed. 1, 1974 U.S. App. LEXIS 8324, Counsel Stack Legal Research, https://law.counselstack.com/opinion/adolph-coors-company-v-federal-trade-commission-ca10-1974.