Cross Subsidization For Purpose Of Enhanced Grocery Sales Through Alleged Below Cost Gasoline Discounts Found Not To Violate California Unfair Practices Act

Injury to competing retail fuel stations is non-actionable where market conditions demonstrate that an "incipient antitrust violation" is not imminent. Dixon Gas Club LLC v. Safeway Inc., Case No. A139283 (Court of Appeal 1st Dist. July 20, 2015) (not for publication).

Dixon Gas Club LLC brought an action against defendant Safeway Inc. under the California Unfair Practices Act and Unfair Competition Law. To enhance its supermarket grocery sales, Safeway granted its grocery customers discounts at retail service stations with whom it had discount contracts. It thus rewarded purchasers of its grocery products with cents-off on their fuel purchases. The discount resulted in fuel sales to grocery customers that were below "total cost." The trial court dismissed the claims and the Court of Appeal (First Appellate District) affirmed, in a not-for-publication opinion.

Plaintiff Dixon filed an action alleging violations of California Business and Professions Code sections 17043 and 17045. Section 17043 provides, in relevant part:

It is unlawful for any person engaged in business within this State to sell any article or product at less than the cost thereof to such a vendor, or to give away any article or product, for the purpose of injuring competitors or destroying competition.

Section 17044 provides in relevant part:

It is unlawful for any person engaged in business within this State to sell or use any article or product as a "loss leader" as defined in . . . this chapter.

Dixon's complaint also alleged violations of the California Unfair Competition Law (UCL), Business and Professions Code Section 17200.

Much has been written as to the legislative and judicial history of the UCL. Most commentators have argued that it is designed to protect both consumers and businesses from "unlawful, unfair or fraudulent business acts or practices and unfair, deceptive, untrue or misleading advertising." The UCL is expansive in its application, as intentionally framed in its broad, sweeping language, precisely to enable judicial tribunals to address the innumerable "new schemes which the fertility of man's invention would contrive". 1 Its purpose has been said to protect consumers and competitors by promoting fair competition in markets for goods and services, extending to the entire consuming public protection traditionally afforded only to business competitors.2 As a strict liability statute, it has not been necessary under the UCL to show that a defendant...