California Civil Jury Instructions (CACI)

3320. Secret Rebates - Essential Factual Elements

[Name of plaintiff] claims that [name of defendant] [insert one or both of the following:]

[secretly [gave/received] [payments/rebates/refunds/ commissions/unearned discounts;]] [or]

[secretly [gave to some buyers/received] services or privileges that were not given to other buyers purchasing on like terms and conditions.]

To establish this claim, [name of plaintiff] must prove all of the following:

1. That [name of defendant] secretly [[gave/received] [payments/rebates/refunds/commissions/unearned discounts]] [or] [[gave to some buyers/received] services or privileges that were not given to other buyers purchasing on like terms and conditions];

2. That a competitor was harmed;

3. That the [payment/allowance] had a tendency to 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

Element 2 should be omitted if the plaintiff is a competitor of the defendant; that issue is covered by element 4.

Sources and Authority

Business and Professions Code § 17045 provides: "The secret payment or allowance of rebates, refunds, commissions, or unearned discounts, whether in the form of money or otherwise, or secretly extending to certain purchasers special services or privileges not extended to all purchasers purchasing upon like terms and conditions, to the injury of a ompetitor and where such payment or allowance tends to destroy competition, is unlawful."

"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.)

"[T]here are three elements to a violation of section 17045. First, there must be a 'secret' allowance of an 'unearned' discount. Second, there must be 'injury' to a competitor. Third, the allowance must tend to destroy competition." (Diesel Electric Sales & Service, Inc. v. Marco Marine San Diego, Inc. (1993) 16 Cal.App.4th 202, 212 [20 Cal.Rptr.2d 62].)

"By its terms, section 17045 requires the plaintiff to prove not only injury to a competitor, but, in addition, a tendency 'to destroy competition.' " (ABC International Traders, Inc. v. Matsushita Electric Corp. of America (1997) 14 Cal.4th 1247, 1262 [61 Cal.Rptr.2d 112, 931 P.2d 290].)

"[P]roof of a knowing or intentional receipt by a buyer of a secret, unearned discount is not required under section 17045." (Diesel Electric Sales & Service, Inc., supra, 16 Cal.App.4th at p. 214, fn. 4.)

"[S]ection 17045 does not require a proof of an 'intent' to destroy competition, but only that the secret, unearned discount had a tendency to destroy competition." (Diesel Electric Sales & Service, Inc., supra, 16 Cal.App.4th at p. 215.)

Those competing against a seller who provides the secret rebate, on the "primary line," have standing to sue under the statute. Likewise, a customer of the seller who is disfavored by that seller providing a secret rebate to competitors of that customer, creating so-called "secondary line" injury, also has standing to sue. (ABC International Traders, supra, 14 Cal.4th at p. 1257.)

Business and Professions Code section 17082 provides, in part: "In any action under this chapter, it is not necessary to allege or prove actual damages or the threat thereof, or actual injury or the threat thereof, to he plaintiff. But, in addition to injunctive relief, any plaintiff in any such action shall be entitled to recover three times the amount of the actual damages, if any, sustained by the plaintiff, as well as three times the actual damages, if any, sustained by any person who has assigned to the plaintiff his claim for damages resulting from a violation of this chapter."

"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.)

Secondary Sources

1 Witkin, Summary of California Law (9th ed. 1987) Contracts, §§ 591- 596, pp. 435-539

1 Antitrust and Trade Regulation Law Section, State Bar of California, California Antitrust Law (2d ed. 1997), § 1.02C

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 (Matthew Bender)

23 California Points and Authorities, Ch. 235, Unfair Competition (Matthew Bender)

(New September 2003)