CACI 3334 Affirmative Defense to Locality Discrimination Claim—Manufacturer Meeting Downstream Competition

California Civil Jury Instructions CACI

3334 Affirmative Defense to Locality Discrimination Claim—Manufacturer Meeting Downstream Competition

[Name of defendant] claims that any locality discrimination proven by [name of plaintiff] was justified by the need to meet competition. To succeed, [name of defendant] must prove that [his/her/nonbinary pronoun/its] sales of [product/service] to [name of reselling customer] were made in an attempt, in good faith, to meet the legal prices of [name of competitor’s reseller] selling in the ordinary course of business in the same locality or trade area.

To meet legal prices means to lower the price to a point that the seller believes in good faith is at or above the legal price of the competitor of the reseller whose price it is trying to meet. That is, a seller may attempt to “meet,” but not “beat,” what in good faith it believes to be that competitor’s legal price.

Directions for Use

This defense applies to locality discrimination when the manufacturer is providing a lower price to its reseller, so that the reseller can compete fairly against the lower prices charged by the reseller of another manufacturer.

Sources and Authority

Manufacturer’s Good-Faith Price to Meet Downstream Competition Permitted. Business and Professions Code section 17050(e).

“The requirement [to ascertain the ‘legal prices’ of competitors] is not absolute. It is merely that the defendants shall have endeavored ‘in good faith’ to meet the legal prices of a competitor.” (People v. Pay Less Drug Store (1944) 25 Cal.2d 108, 117 [153 P.2d 9].)

“The operator of a service industry cannot legally reduce its prices to a below-cost figure with intent to injure another or offer free service to prevent further loss of business to a competitor ‘who is indiscriminately and deliberately offering free service and below cost prices to such operator’s customers.’ Each side must obey the law; the fact that one competing party disregards the statute does not give the other side a legal excuse to do so.” (G.B. Page v. Bakersfield Uniform & Towel Supply Co. (1966) 239 Cal.App.2d 762, 770 [49 Cal.Rptr. 46].)

Secondary Sources

1 Witkin, Summary of California Law (11th ed. 2017) Contracts, §§ 623–629
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, § 565.53 (Matthew Bender)
1 Matthew Bender Practice Guide: California Unfair Competition and Business Torts, Ch. 5, Antitrust, 5.100[6]