FTC v. Fred Meyer, Inc.
390 U.S. 341 (1968)

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U.S. Supreme Court

FTC v. Fred Meyer, Inc., 390 U.S. 341 (1968)

Federal Trade Commission v. Fred Meyer, Inc.

No. 27

Argued November 6, 1967

Decided March 18, 1968

390 U.S. 341

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Syllabus

The Federal Trade Commission (FTC) ruled that respondents, the corporate owner of a chain of supermarkets (Meyer) and two of its officers, had unlawfully induced suppliers to engage in discriminatory pricing and sales promotion activities prohibited by §§ 2(a) and 2(d) of the Clayton Act, as amended by the Robinson-Patman Act. The FTC held that § 2(d) prohibits a supplier from granting promotional allowances to a direct-buying retailer like Meyer unless the allowances are also made available to wholesalers who purchase from the supplier and resell to the direct-buying retailer's competitors. The Court of Appeals adopted respondents' view that the statutory requirement of proportional equality among "customers competing in the distribution" of products concerned competition at the same functional level of distribution, which did not include competition between direct-buying retailers and wholesalers, and that retailers competing with Meyer were not customers of the suppliers, but were customers of the wholesalers. The court set aside that portion of the FTC order which barred respondents from inducing suppliers to grant them promotional allowances not available to "customers who resell to purchasers who compete with respondents in the resale of such supplier's products."

Held: On the facts of this case, § 2(d) reaches only discrimination between customers competing for resales at the same functional level. Pp. 390 U. S. 348-358.

(a) The Act does not mandate proportional equality between the direct-buying retailer, Meyer, and the wholesalers. Pp. 390 U. S. 348-349, 355-357.

(b) "Customer" in § 2(d) includes a retailer who buys through wholesalers and competes with a direct-buying retailer in the resale of the supplier's products. Pp. 390 U. S. 348-352.

(c) The FTC found that Meyer competed in the resale of certain suppliers' products with other retailers in the area who

Page 390 U. S. 342

purchased the products through wholesalers, and the Court of Appeals did not disturb this finding. P. 390 U. S. 354.

(d) Since, in this case, the direct impact of the discriminatory promotional allowances is felt by the disfavored retailers, the most reasonable construction of § 2(d) is one which places on the supplier the responsibility for making promotional allowances available to those resellers who compete directly with the favored buyer. P. 390 U. S. 357.

(e) A supplier may, consistently with the other provisions of the antitrust laws, utilize his wholesalers to distribute payments or administer promotional programs, as long as the supplier assumes responsibility, under the FTC's rules, for seeing that the allowances are made available to all who compete in the resale of his products. P. 390 U. S. 358.

359 F.2d 351, reversed in part and remanded.

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court.

The Federal Trade Commission, after extensive proceedings, ruled that respondents, the corporate owner of a chain of supermarkets and two of its officers, had unlawfully induced certain suppliers to engage in discriminatory pricing and sales promotional activities prohibited by §§ 2(a) and 2(d) of the Clayton Act, as amended

Page 390 U. S. 343

by the Robinson-Patman Act. [Footnote 1] 63 F.T.C. (1963). The Court of Appeals for the Ninth Circuit disagreed with the Commission's construction of § 2(d), and reversed in part its ruling that the section had been violated. 359 F.2d 351 (1966). We granted certiorari, 386 U.S. 907 (1967), because the case presents important questions concerning the scope of a key provision of the Robinson-Patman Act.

I

Section 2(d) makes it unlawful for a supplier in interstate commerce to grant advertising or other sales promotional allowances to one "customer" who resells the supplier's "products or commodities" unless the allowances are "available on proportionally equal terms to all other customers competing in the distribution of such products or commodities." [Footnote 2] Although we have limited our review of this case to one aspect of the alleged § 2(d)

Page 390 U. S. 344

violations, [Footnote 3] full understanding of the issues requires a brief exposition of the facts from which the Commission concluded that respondents had induced violations of both §§ 2(a) and 2(d). The relevant facts found by the Commission were not disturbed by the Court of Appeals.

Respondent Fred Meyer, Inc. , operates a chain of 13 supermarkets in the Portland, Oregon, area which engage in the retail sale of groceries, drugs, variety items, and a limited line of clothing. In 1957, Meyer's sales exceeded $40,000,000. According to its 1960 prospectus, it made one-fourth of the retail food sales in the Portland area, and was the second largest seller of all goods in that area. Since 1936, Meyer has conducted annually a four-week promotional campaign in its stores based on the distribution of coupon books to consumers. The books usually contain 72 pages, each page featuring a single product being sold by Meyer at a reduced price. The consumer buys the book for the nominal sum of 10

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