Supermarket Services, Inc. v. Hartz Mountain Corp.

382 F. Supp. 1248, 1974 U.S. Dist. LEXIS 6403
CourtDistrict Court, S.D. New York
DecidedOctober 8, 1974
Docket74 Civ. 4267
StatusPublished
Cited by8 cases

This text of 382 F. Supp. 1248 (Supermarket Services, Inc. v. Hartz Mountain Corp.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Supermarket Services, Inc. v. Hartz Mountain Corp., 382 F. Supp. 1248, 1974 U.S. Dist. LEXIS 6403 (S.D.N.Y. 1974).

Opinion

OPINION AND ORDER

WERKER, District Judge.

This is an application for a preliminary injunction under section 16 of the Clayton Act, 15 U.S.C. § 26 (1970), and Rule 65 of the Federal Rules of Civil Procedure.

On September 30, 1974, plaintiff, Supermarkets Services, Inc., (“Services”) filed a complaint in this Court against the defendant, Hartz Mountain Corporation (“Hartz”), for treble damages, preliminary and permanent injunctive relief. Services alleges violations of sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1 and 1px solid var(--green-border)">2) through territorial *1249 and customer limitations allegedly imposed by Hartz on Services, and by Hartz’s alleged monopolization or attempting to monopolize the sale and distribution of pet accessories and bird food, particularly to mass merchandising outlets. 1

This Court refused to issue a temporary restraining order, but ordered the parties to appear on October 2nd for a hearing on the preliminary injunction aspects of the litigation. The facts set forth below summarize the affidavits and testimony given by both parties during nearly two days of hearings.

BACKGROUND

Services, a subsidiary of the APL Corporation, is a sales-service distributor of non-food products including health and beauty aids, pet accessories, housewares, stationery, books, notions, cosmetics, cleaning aids, and shoe products to over 1,400 supermarkets, drug stores and department stores in an area reaching from Springfield, Massachusetts, west to Buffalo, New York, and Pittsburg, Pennsylvania, and south to North Carolina.

Services is known in the service merchandising trade as a “rack jobber” since it not only purchases non-food items from suppliers and resells them to mass merchandising outlets, but also performs a variety of service functions such as order taking, inventory control, stacking of merchandise, price marking, and cleaning and maintaining of display racks. According to its president, Services is the second or third largest rack jobber in the eastern United States, with total annual sales of over $40,000,000.

For the past several years, Services has been distributing pet supplies under a contractual arrangement with Hartz. Out of $40,000,000 in annual sales, $1,200,000 is attributable to the sale of pet supplies. Services distributes Hartz products primarily in the Washington, D. C. area where it has three major customers, Peoples Drug Stores (“Peoples”), Dart Drug Stores (“Dart”) and Grand Union Supermarkets. Services sells a wide variety of non-food products to Grand Union, but only pet supplies to Peoples and Dart. Services also sells Hartz to over fifty independent supermarkets in the Buffalo area which are serviced by one wholesaler, Peter J. Schmitt.

Hartz is one of the largest, if not the largest, 2 supplier of pet supplies in the United States, with annual worldwide sales of $151,000,000 and U. S. sales of $130,000,000. Hartz, under the brand names Hartz and Delta, sells a large variety of products for the care, feeding, grooming and general well being of pets including cages, foods, toys, collars and leashes.

Hartz distributes its products to over 50,000 stores through a distribution system of independent rack jobbers who take care of the functions of delivering the merchandise to stores, stocking the shelves, placing the merchandise, rotating the merchandise, removing shopworn and slow-moving goods, and setting up floor displays and promotions. Besides selling its products to distributors for resale, Hartz also sells directly to retail outlets and to that extent is a competitor with the distributors.

Hartz has spent over twenty-five years in developing a network of distributors with the ability to service its racks and thus help to maximize its sales. The Hartz products are placed on racks, with a typical four foot rack containing from 120-180 different products. According to Hartz, the key to its success is the servicing of these racks by the specially trained distributors.

*1250 While Services claims that Hartz is the dominant force in the industry, and that all of the Services’s customers have developed a strong brand loyalty for Hartz, Hartz maintains that it competes vigorously with several large competitors such as Sargeants, R. T. French and the Metafram Corporation.

PRIOR DEALINGS OF THE PARTIES

Services’s relations with Hartz started in 1967 when Services acquired the Richray Distributing Company, a large rack-jobber in the Washington, D. C. area. Richray had a “Distributor Contract” with Hartz which, inter alia, had a primary responsibility clause (although no territory was specified), and which required Richray to use its “best efforts” in the promotion, sale, and servicing of Hartz products. The contract was automatically renewable at one year intervals and Richray, and subsequently Services through Richray, distributed Hartz products under the contract until February 4, 1969, when a new contract was signed.

The new contract is essentially the same as the old, except it is now entitled “Service Distribution Contract,” the words “on a service basis” have been added to the primary responsibility clause, the words “through service” have been added to the best efforts clause, and the clause permitting the distributor to exercise his independent business judgment has been expanded. 3

Services distributed Hartz products under both the 1963 and the 1969 Rich-ray contracts through what is known for the purposes of this litigation as the “Old Program.” The Old Program was, and still is, a conventional servicing program where merchandise and services are sold together at a charge of retail price less a discount without regard to the volume of products per delivery. Services would perform all its rack jobbing functions under the Old Program including inventory control, promotion, and, at least as to Hartz products, fully servicing and maintaining the display racks.

In mid-June of 1974, Services announced what it called a “New Program” which is basically a form of cost plus wholesaling. The cost of goods and services are no longer aggregated, and the price of each is specified. Retail outlets are now given the option of doing their own servicing or continuing to use the services provided by Services. The cost of warehousing is segregated and there is now a separate charge for *1251 deliveries which is determined by the dollar volume of the order.

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Bluebook (online)
382 F. Supp. 1248, 1974 U.S. Dist. LEXIS 6403, Counsel Stack Legal Research, https://law.counselstack.com/opinion/supermarket-services-inc-v-hartz-mountain-corp-nysd-1974.