CACI 3302 Loss Leader Sales—Essential Factual Elements

California Civil Jury Instructions CACI

3302 Loss Leader Sales—Essential Factual Elements

[Name of plaintiff] claims that [name of defendant] [offered to sell/sold/offered the use of] [product/service] as an unlawful loss leader. To establish this claim, [name of plaintiff] must prove all of the following:

1.That [name of defendant] [offered to sell/sold/offered the use of] [product/service] at prices that were below [his/her/nonbinary pronoun/its] costs;

2.[Insert one or more of the following:]

[That [name of defendant]’s purpose was to influence, promote, or encourage the purchase of other merchandise from [him/her/nonbinary pronoun/it]; [or]]

[That the [offer/sale] had a tendency or capacity to mislead or deceive purchasers or potential purchasers; [or]]

[That the [offer/sale] took business away from or otherwise injured competitors;]

3.That [name of defendant]’s intent was to injure competitors or destroy competition;

4.That [name of plaintiff] was harmed; and

5.That [name of defendant]’s conduct was a substantial factor in causing [name of plaintiff]’s harm.

Directions for Use

The word “price” as used here should be read sufficiently broadly to include “special rebates, collateral contracts, or any device of any nature whereby such sale below cost is in substance or fact effected.” (Bus. & Prof. Code, § 17049.) To the extent the circumstances of the case warrant it, the word “price” in the instruction may be supplemented or supplanted by other price-related terms.

For instructions on “cost,” see CACI No. 3303, Definition of “Cost”; CACI No. 3304, Presumptions Concerning Costs—Manufacturer; CACI No. 3305, Presumptions Concerning Costs—Distributor; and CACI No. 3306, Methods of Allocating Costs to an Individual Product.

Business and Professions Code sections 17071 and 17071.5 create rebuttable presumptions regarding the purpose or intent to injure competitors or destroy competition. The Supreme Court has observed: “The obvious and only effect of this provision is to require the defendants to go forward with such proof as would bring them within one of the exceptions or which would negative the prima facie showing of wrongful intent.” (People v. Pay Less Drug Store (1944) 25 Cal.2d 108, 114 [153 P.2d 9].)

Sources and Authority

“Loss Leader” Sales Prohibited. Business and Professions Code section 17044.

“Loss Leader” Defined. Business and Professions Code section 17030.

“Article or Product” Defined. Business and Professions Code section 17024.

Actual Damages or Injury Not Required. Business and Professions Code section 17082.

“The purpose of the Unfair Practices Act (UPA) is ‘to safeguard the public against the creation or perpetuation of monopolies and to foster and encourage competition, by prohibiting unfair, dishonest, deceptive, destructive, fraudulent and discriminatory practices by which fair and honest competition is destroyed or prevented.’ It forbids most locality discriminations, the use of loss leaders, gifts, secret rebates, boycotts, and ‘deceptive, untrue or misleading advertising.’ It also prohibits the sale of goods and services below cost.” (Pan Asia Venture Capital Corp. v. Hearst Corp. (1999) 74 Cal.App.4th 424, 431–432 [88 Cal.Rptr.2d 118], internal citations omitted.)

“[N]otwithstanding the absence of any language to this effect in either section 17044 or section 17030, intent to injure competitors or to destroy competition is required for violation of section 17044. In other words, for competition to be unfair under the Act, the person engaging in the challenged practice must possess an intent to injure his competitors or destroy his competition.” (Dooley’s Hardware Mart v. Food Giant Markets, Inc. (1971) 21 Cal.App.3d 513, 517 [98 Cal.Rptr. 543].)

“We conclude that to violate sections 17043 and 17044, part of the Unfair Practices Act, which prohibit below-cost sales and loss leaders, a company must act with the purpose, i.e., the desire, of injuring competitors or destroying competition.” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 169 [83 Cal.Rptr.2d 548, 973 P.2d 527].)

It has been held by one federal district court interpreting California’s loss leader statute that it applies only to product sales, not giveaways. (Co-Opportunities, Inc. v. National Broadcasting Co., Inc. (N.D. Cal. 1981) 510 F.Supp. 43, 50.)

“While, similar to other cases, damages cannot be awarded in antitrust cases upon sheer guesswork or speculation, the plaintiff seeking damages for loss of profits is required to establish only with reasonable probability the existence of some causal connection between defendant’s wrongful act and some loss of the anticipated revenue. Once that has been accomplished, the jury will be permitted to act upon probable and inferential proof and to ‘make a just and reasonable estimate of the damage based on relevant data, and render its verdict accordingly.’ ” (Suburban Mobile Homes, Inc. v. AMFAC Communities, Inc. (1980) 101 Cal.App.3d 532, 545 [161 Cal.Rptr. 811], internal citations omitted.)

The federal law most comparable to the Unfair Practices Act is the Robinson-Patman Act (15 U.S.C. § 13 et seq.); that act differs substantially from the Unfair Practices Act, however. For a discussion of this subject, see Turnbull & Turnbull v. ARA Transportation (1990) 219 Cal.App.3d 811 [268 Cal.Rptr. 856]. One notable difference is that the Robinson-Patman Act requires at least two actual sales. Thus, mere offers to sell cannot violate that act.

Secondary Sources

1 Witkin, Summary of California Law (11th ed. 2017) Contracts, § 628
3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts, § 40.153 (Matthew Bender)
49 California Forms of Pleading and Practice, Ch. 565, Unfair Competition, § 565.52 (Matthew Bender)
23 California Points and Authorities, Ch. 235, Unfair Competition, § 235.22 et seq. (Matthew Bender)
1 Matthew Bender Practice Guide: California Unfair Competition and Business Torts, Ch. 5, Antitrust, 5.46[4], 5.47[3]