1. By petitioners' basing-point system of pricing in their sales
of glucose, their product was sold at delivered prices computed by
adding to a base price at Chicago the published freight tariff from
Chicago to the delivery points, even though deliveries were in fact
made from their Kansas City factory as well as from their Chicago
factory. On shipments from Kansas City, the delivered price to the
purchaser thus depended not only on the base price plus the actual
freight from Kansas City, but also upon the difference between the
actual freight paid and the freight rate from Chicago.
Held:
(A) The price discriminations resulting from petitioners'
basing-point system violated § 2(a) of the Clayton Act, as amended.
Pp.
324 U. S. 732,
324 U. S.
737.
(a) It is immaterial that there was no discrimination between
buyers at the same points of delivery. P.
324 U. S.
734.
(b) There is nothing in the legislative history of the Clayton
Act or the amendatory Robinson-Patman Act which confines their
application to discriminations between buyers at the same
destination. P.
324 U. S.
734.
(c) The contention that basing-point systems were well known
prior to the enactment of the Robinson-Patman Act and were
considered by Congress to be legal, and that their legality should
be sustained in the absence of a clear command to the contrary, is
rejected. P.
324 U. S.
734.
(d)
Maple Flooring Assn. v. United States, 268 U.
S. 563, and
Cement Manufacturers Assn. v. United
States, 268 U. S. 588,
distinguished. P.
324 U. S.
735.
Page 324 U. S. 727
(B) The findings and the evidence support the Federal Trade
Commission's determination that petitioners' discriminations in
price have the effect on competition which brings the
discriminations within the prohibition of § 2(a) of the Act. P.
324 U. S.
738.
(a) Under § 2(a), discriminations need not in fact have had a
"substantially" adverse effect on competition; it is sufficient
that they "may" have that effect. P.
324 U. S.
738.
(b) The weight to be attributed to the facts proven or
stipulated, and the inferences to be drawn from them, are for the
Commission to determine, not the courts. P.
324 U. S.
739.
2. Petitioners also violated § 2(a) of the Clayton Act, as
amended, by permitting certain favored customers to secure options
for the purchase of glucose, and to take delivery at the former
lower prices, for periods longer than those usually permitted to
other customers, and by permitting certain tank wagon customers to
book orders at the lower prices charged for tank car deliveries and
to take deliveries by tank wagon over extended periods of time. P.
324 U. S.
740.
(a) Even assuming that the practices prohibited by § 2(a) are
discriminations in price, and not in the terms and conditions of
sale other than price, the present discriminations in the terms of
sale operated to permit the favored customers to purchase at a
lower price than other customers, so that their only practical
effect was to establish discriminations in price, precisely the
evil at which the statute was aimed. P.
324 U. S.
740.
(b) Section 2(a) applies to indirect as well as direct
discriminations in price. P.
324 U. S.
740.
(c) Petitioners failed to sustain the burden of showing that the
price discriminations were granted for the purpose of meeting the
"equally low" prices of competitors and that they were therefore
excepted from the prohibition of § 2(a) of the Clayton Act by the
proviso of subsection (b) of § 2 of that Act. P.
324 U. S.
741.
(d) The stipulated facts support the Commission's finding that
the practices in question have the effect on competition which
brings them within the prohibition of the Act. P.
324 U. S.
741.
3. The price discriminations which resulted from petitioners'
allowance of discounts to certain favored purchasers of gluten feed
and meal, byproducts of petitioners' refining of corn, and
allowance of discounts to certain favored purchasers of starch and
starch products, violated § 2(a). P.
324 U. S.
742.
(a) The statute does not require that the discriminations must
in fact have harmed competition, but only that there is a
reasonable possibility that they "may" have such an effect. P.
324 U. S.
742.
Page 324 U. S. 728
(b) From the evidence, it was permissible for the Commission to
infer that these discriminatory allowances were a substantial
threat to competition. P.
324 U. S.
742.
4. Petitioners' arrangement with the Curtiss Company for
advertising dextrose on terms not proportionally accorded other
purchasers violated § 2(e) of the Clayton Act. P.
324 U. S.
743.
(a) The arrangement was made with the Curtiss Company as a
"purchaser" within the meaning of the Act. The statute does not
require that the discrimination in favor of one purchaser against
another shall be provided for in a purchase contract or be required
by it. It is enough if the discrimination be made in favor of one
who is a purchaser and denied to another purchaser or other
purchasers of the commodity. P.
324 U. S.
743.
(b) The Curtiss Company, which purchased dextrose from
petitioners and converted it with other ingredients into candy
which it sold, was a purchaser of a commodity bought for "resale,"
after "processing," within the meaning of the Act. P.
324 U. S.
744.
(c) The evidence shows that the discrimination in favor of the
Curtiss Company was a discrimination against sales in interstate
commerce. P.
324 U. S.
745.
(d) The advertising furnished by petitioners was a service or
facility "connected with the processing . . . sale, or offering for
sale" of the commodity purchased by the Curtiss Company upon terms
not accorded to other purchasers. P.
324 U. S.
745.
144 F.2d 211 affirmed.
Certiorari, 323 U.S. 706, to review a judgment sustaining an
order of the Federal Trade Commission.
MR. CHIEF JUSTICE STONE delivered the opinion of the Court.
Petitioners, a parent corporation and its sales subsidiary, use
a basing point system of pricing in their sales
Page 324 U. S. 729
of glucose. They sell only at delivered prices, computed by
adding to a base price at Chicago the published freight tariff from
Chicago to the several points of delivery, even though deliveries
are in fact made from their factory at Kansas City as well as from
their Chicago factory. Consequently there is included in the
delivered price on shipments from Kansas City an amount of
"freight" which usually does not correspond to freight actually
paid by petitioners.
The Federal Trade Commission instituted this proceeding under §
11 of the Clayton Act, c. 323, 38 Stat. 730, 15 U.S.C. § 21,
charging that petitioners' use of this single basing point system
resulted in discriminations in price between different purchasers
of the glucose, and violated § 2(a) of the Act, as amended by § 1
of the Robinson-Patman Act, c. 592, 49 Stat. 1526, 15 U.S.C. §
13(a). The complaint also charged petitioners with other
discriminations in prices, or in services rendered to favored
customers, which will presently be stated in detail, all in
violation of § 2(a) or § 2(e) of the Clayton Act, as amended.
Section 2(a) provides in part:
"(a) . . . it shall be unlawful for any person engaged in
commerce . . . either directly or indirectly, to discriminate in
price between different purchasers of commodities of like grade and
quality, . . . where the effect of such discrimination may be
substantially to lessen competition or tend to create a monopoly in
any line of commerce, or to injure, destroy, or prevent competition
with any person who either grants or knowingly receives the benefit
of such discrimination, or with customers of either of them:
Provided, That nothing herein contained shall prevent
differentials which make only due allowance for differences in the
cost of manufacture, sale, or delivery resulting from the differing
methods or quantities in which such commodities are to such
purchasers sold or delivered. . . . "
Page 324 U. S. 730
After hearings at which much of the evidence was stipulated, the
Commission made its findings of fact. It concluded that petitioners
had violated § 2 of the Clayton Act, as amended, and ordered them
to cease and desist from such violations. On petition to review the
Commission's order, the Circuit Court of Appeals for the Seventh
Circuit sustained the order, except in particulars not material
here. 144 F.2d 211.
We granted certiorari, 323 U.S. 706, because the questions
involved are of importance in the administration of the Clayton Act
in view of the widespread use of basing point price systems. The
principal questions for decision are whether, when shipments are
made from Kansas City, petitioners' basing point system results in
discriminations in price between different purchasers of glucose
within the meaning of § 2(a) and, if so, whether there is support
in the evidence for the finding of the Commission that these
discriminations have the effect on competition defined by that
section. Further questions are raised as to whether the other
discriminations charged violate § 2(a) and § 2(e).
I
.
Basing Point Practices
The evidence as to petitioners' basing point system for the sale
of glucose was stipulated. The Commission found from the evidence
that petitioners have two plants for the manufacture of glucose or
corn syrup, one at Argo, Illinois, within the Chicago switching
district, and the other at Kansas City, Missouri. The Chicago plant
has been in operation since 1910, and that at Kansas City since
1922. Petitioners' bulk sales of glucose are at delivered prices,
which are computed, whether the shipments are from Chicago or
Kansas City, at petitioners' Chicago prices plus the freight rate
from Chicago to the place of delivery. Thus, purchasers in all
places other than Chicago pay a higher price than do Chicago
purchasers. And, in the case of all shipments from Kansas City to
purchasers in cities
Page 324 U. S. 731
having a lower freight rate from Kansas City than from Chicago,
the delivered price includes unearned or "phantom" freight, to the
extent of the difference in freight rates. Conversely, when the
freight from Kansas City to the point of delivery is more than that
from Chicago, petitioners must "absorb" freight upon shipments from
Kansas City, to the extent of the difference in freight.
The Commission illustrated the operation of the system by
petitioners' delivered prices for glucose in bulk in twelve western
and southwestern cities, to which shipments were usually made from
Kansas City. On August 1, 1939, the freight rates to these points
of delivery from Chicago were found to exceed those from Kansas
City by from 4 to 40 cents per hundred pounds, and to that extent
the delivered prices included unearned or phantom freight. As
petitioners' Chicago price was then $2.09 per hundred pounds, this
phantom freight factor with respect to deliveries to these twelve
cities represented from 2 to 19% of the Chicago base price. From
this it follows, as will presently be seen, that petitioners' net
return at their Kansas City factory on sales to these twelve
cities, in effect their f.o.b. factory price, varied according to
the amount of phantom freight included in the delivered price.
Much of petitioners' glucose is sold to candy manufacturers, who
are in competition with each other in the sale of their candy.
Glucose is the principal ingredient in many varieties of low priced
candies, which are sold on narrow margins of profit. Customers for
such candies may be diverted from one manufacturer to another by a
difference in price of a small fraction of a cent per pound.
The Commission found that the higher prices paid for glucose
purchased from petitioners by candy manufacturers located in cities
other than Chicago result in varying degree in higher costs of
producing the candies. The degree in each instance varies with the
difference in the delivered price of the glucose, and the
proportion of glucose
Page 324 U. S. 732
in the particular candy. Manufacturers who pay unearned or
phantom freight under petitioners' basing point system necessarily
pay relatively higher costs for their raw material than do those
manufacturers whose location with relation to the basing point is
such that they are able to purchase at the base price plus only the
freight actually paid. The Commission found that the payment of
these increased prices imposed by the basing point system "may . .
. diminish" the manufacturers' ability to compete with those buyers
at lower prices.
The Commission concluded from these facts that petitioners'
basing point system resulted in discriminations in price among
purchasers of glucose, and that the discriminations result in
substantial harm to competition among such purchasers. Petitioners
challenge each conclusion.
First. Section 2(a) of the Clayton Act, as amended,
makes it unlawful for any person "either directly or indirectly, to
discriminate in price between different purchasers of commodities
of like grade and quality. . . ." The statute permits differentials
"which make only due allowance for differences in the costs of
manufacture, sale, or delivery. . . ."
Petitioners' pricing system results inevitably in systematic
price discriminations, since the prices they receive upon
deliveries from Kansas City bear relation to factors other than
actual costs of production or delivery. As in the case of the
twelve cities selected by the Commission for illustrative purposes,
the freight actually paid by petitioners in making deliveries
usually varies from the freight factor from Chicago, used in
computing the delivered price. When the actual freight is the
lesser of the two, petitioners charge and collect unearned or
phantom freight; when it is the greater, petitioners absorb the
excess freight, which they pay but do not include in the
computation of their delivered price.
Page 324 U. S. 733
In either event, on shipments from Kansas City, the delivered
price to the purchaser depends not only on the base price plus the
actual freight from Kansas City, but also upon the difference
between the actual freight paid and the freight rate from Chicago
which is included in the delivered price. This difference also
results in varying net prices to petitioners at their factory at
Kansas City, according to the destination of the glucose. The
factory net varies according as petitioners collect phantom freight
or absorb freight, and in each case in the amount of this freight
differential. [
Footnote 1] The
price discriminations resulting from this systematic inclusion of
the freight differential in computing the delivered price are not
specifically permitted by the statute. Hence, they are unlawful,
unless, as petitioners argue, there is an implicit exception to the
statute for such a basing point system.
Page 324 U. S. 734
Petitioners point out that there is no discrimination under
their basing point system between buyers at the same points of
delivery, and urge that the prohibition of § 2(a) is directed only
at price discriminations between buyers at the same delivery
points. There is nothing in the words of the statute to support
such a distinction, since the statute is not couched in terms of
locality. And its purpose to prevent injuries to competition
through price discriminations would preclude any such distinction,
not required by its language. The purchasers of glucose from
petitioners are found to be in competition with each other, even
though they are in different localities. The injury to the
competition of purchasers in different localities is no less
harmful than if they were in the same city.
We find nothing in the legislative history of the Clayton or
Robinson-Patman Acts to support the suggested distinction. It is
true that § 3 of the Robinson-Patman Act, 15 U.S.C. § 13a,
incorporating the Borah-Van Nuys Bill, S. 4171, 74th Cong., 2d
Sess., imposes criminal penalties for selling goods "in any part of
the United States at prices lower than those exacted . . .
elsewhere in the United States for the purpose of destroying
competition. . . ." But this section does not restrict the
operation of the prohibitions, with civil sanctions, of the
Robinson-Patman amendments to § 2(a) of the Clayton Act. This was
specifically pointed out by the Conference Report on the
Robinson-Patman Act. [
Footnote
2] H.Rep. No. 2951, 74th Cong., 2d Sess., p. 8.
Petitioners further contend that basing point systems were well
known prior to the enactment of the Robinson-Patman Act, and were
considered by Congress to be legal. From this, petitioners conclude
that they remained legal in the absence of a clear command to the
contrary.
Cf.
Page 324 U. S. 735
Parker v. Motor Boat Sales, 314 U.
S. 244;
Helvering v. Griffiths, 318 U.
S. 371. But we think that the premise falls, and with it
the conclusion, whatever it might be if the premise were valid.
In support of the legality of basing point systems, petitioners
rely on
Maple Flooring Assn. v. United States,
268 U. S. 563,
268 U. S. 570,
and
Cement Manufacturers Protective Assn. v. United
States, 268 U. S. 588,
268 U. S. 597.
But these were suits to restrain violations of the Sherman Act, and
did not involve the prohibition of the Clayton Act upon
discriminations in price. The only question for decision in those
cases was whether there was a concerted price-fixing scheme among
competing sellers, accomplished in part by their adoption of a
uniform basing point system; in fact, no prohibited concert of
action was found.
In any event, the basing point systems involved in those cases
were quite unlike that used by petitioners. In the
Maple
Flooring case,
supra, the single basing point was so
close to most of the points of production as to result in but
trivial freight variances, and the defendants in that case were
willing to sell on a f.o.b. mill basis whenever the purchaser so
requested. In the
Cement case,
supra, the
defendants used a multiple basing point system, with a basing point
at or near each point of production. Under this system, any
manufacturer, in order to compete in the territory closer
freightwise to another, would absorb freight by adjusting his mill
price to make his delivered price as low as that of his
competitors. Under this system, the delivered price for any
locality was determined by the nearest basing point. We have no
occasion to decide whether a basing point system such as that in
the
Cement case is permissible under the Clayton Act, in
view of the provisions of § 2(b), permitting reductions in price in
order to meet a competitor's equally low price.
Cf. Federal
Trade Commission v. A. E. Staley Mfg. Co., post, p.
324 U. S. 746.
When the Robinson-Patman Act was adopted in 1936,
Page 324 U. S. 736
there was no settled construction of the Clayton Act in the
federal courts contrary to that now urged by the Commission, as was
the case with the measures involved in
Helvering v. Griffiths,
supra. Nor was there any settled administrative construction
to the contrary. In fact, in 1924, in the only decision involving
the problem, the Federal Trade Commission, after extensive
investigation and hearings, ordered the United States Steel
Corporation and its subsidiaries to cease and desist from the sales
of their rolled steel products on the "Pittsburgh-Plus" price
system. 8 F.T.C. 1. The Commission held that the use of a single
basing point at Pittsburgh for steel plants over the country was a
violation of § 2 of the Clayton Act, as well as § 5 of the Federal
Trade Commission Act, 15 U.S.C. § 45, as they then read. The
respondents in that case sought no review of the Commission's
order, and filed with the Commission a formal statement of intended
compliance with it.
Petitioners also rely on the failure of the Commission to make
further orders against basing point systems in the period from 1924
to the passage of the Robinson-Patman Act in 1936. The Commission
undertook no further proceedings, because of difficulties of
enforcement which it attributed to the exemption provisions of § 2
and to decisions of the lower federal courts in Clayton Act cases.
Instead, it pressed for clarifying amendments to the Act.
See the Commission's Final Report on the Chain Store
Investigation (1936), Sen.Doc. No. 4, 74th Cong., 1st Sess., pp.
89-90, 96-97. The Robinson-Patman Act was adopted in response to
the Commission's recommendation that defects in § 2 be remedied and
its prohibition of price discrimination strengthened.
Finally, petitioners argue that Congress, by the rejection of a
provision of the Robinson-Patman Bill which would have in effect
prohibited all basing point systems, has indicated its intention to
sanction all such systems.
Page 324 U. S. 737
This provision, as reported to the House by the Committee on the
Judiciary, would have defined "price," as used in § 2 of the
Clayton Act, as meaning "the amount received by the vendor after
deducting actual freight or cost of other transportation, if any,
allowed or defrayed by the vendor."
The practical effect of this provision would have been to
require that the price of all commodities sold in interstate
commerce be computed on an f.o.b. factory basis, in order to avoid
the prohibited discriminations in selling price. It would have
prohibited any system of uniform delivered prices, as well as any
basing point system of delivered prices. These effects were
recognized in the Committee's report,
see H.Rep. No. 2287,
74th Cong., 2d Sess., p. 14, and in the debates upon the
Robinson-Patman Bill.
Cf. 80 Cong.Rec. 8118, 8223-8224.
Indeed, the provision would have prohibited such a multiple basing
point system as that in
Cement Manufacturers Protective Assn.
v. United States, supra, as well as the present system.
Such a drastic change in existing pricing systems as would have
been effected by the proposed amendment engendered opposition,
which finally led to the withdrawal of the provision by the House
Committee on the Judiciary. 80 Cong.Rec. 8102, 8140, 8224. We think
this legislative history indicates only that Congress was unwilling
to require f.o.b. factory pricing, and thus to make all uniform
delivered price systems and all basing point systems illegal
per se. On the contrary, we think that it left the
legality of such systems to be determined accordingly as they might
be within the reach of § 2(a), as enacted, and its more restricted
prohibitions of discriminations in delivered prices.
We conclude that the discriminations involved in petitioners'
pricing system are within the prohibition of the Act. We pass to
the question whether these discriminations had the prescribed
effect on competition.
Page 324 U. S. 738
Second. Section 2(a) of the Clayton Act, as amended,
prohibits only discriminations whose
"effect . . . may be substantially to lessen competition . . .
in any line of commerce, or to injure, destroy, or prevent
competition with any person who either grants or knowingly receives
the benefit of such discrimination, or with customers of either of
them. . . ."
Petitioners insist that the Commission's findings, based upon
the facts stipulated, do not support its conclusion that
petitioners' discriminations have the prescribed effect.
It is to be observed that § 2(a) does not require a finding that
the discriminations in price have in fact had an adverse effect on
competition. The statute is designed to reach such discriminations
"in their incipiency," before the harm to competition is effected.
It is enough that they "may" have the prescribed effect.
Cf.
Standard Fashion Co. v. Magrane-Houston Co., 258 U.
S. 346,
258 U. S.
356-357. But, as was held in the
Standard
Fashion case,
supra, with respect to the like
provisions of § 3 of the Clayton Act, prohibiting tying clause
agreements the effect of which "may be substantially to lessen
competition," the use of the word "may" was not to prohibit
discriminations having "the mere possibility" of those
consequences, but to reach those which would probably have the
defined effect on competition.
Since petitioners' basing point system results in a Chicago
delivered price which is always lower than any other, including
that at Kansas City, a natural effect of the system is the creation
of a favored price zone for the purchasers of glucose in Chicago
and vicinity which does not extend to other points of manufacture
and shipment of glucose. Since the cost of glucose, a principal
ingredient of low-priced candy, is less at Chicago, candy
manufacturers there are in a better position to compete for
business, and manufacturers of candy located near other factories
producing glucose, distant from the basing point,
Page 324 U. S. 739
as Kansas City, are in a less favorable position. The
consequence is, as found by the Commission, that several
manufacturers of candy who were formerly located in Kansas City or
other cities served from petitioners' Kansas City plant have moved
their factories to Chicago.
Further, we have seen that prices in cities to which shipments
are made from Kansas City are frequently discriminatory, since the
prices in such cities usually vary according to factors, phantom
freight or freight absorption, which are unrelated to any proper
element of actual cost. And these systematic differentials are
frequently appreciable in amount. The Commission's findings that
glucose is a principal ingredient of low priced candy and that
differences of small fractions of a cent in the sales price of such
candy are enough to divert business from one manufacturer to
another readily admit of the Commission's inference that there is a
reasonable probability that the effect of the discriminations may
be substantially to lessen competition.
The weight to be attributed to the facts proven or stipulated,
and the inferences to be drawn from them, are for the Commission to
determine, not the courts.
See Federal Trade Commission v.
Pacific States Paper Trade Assn., 273 U. S.
52,
273 U. S. 63;
Federal Trade Commission v. Algoma Lumber Co.,
291 U. S. 67,
291 U. S. 73;
cf. National Labor Relation's Board v. Southern Bell Tel.
Co., 319 U. S. 50,
319 U. S. 60. We
cannot say that the Commission's inference here is not supported by
the stipulated facts, or that it does not support the Commission's
order.
II
.
Booking Practices
Ordinarily, when petitioners announce an advance in the price of
glucose, they allow their customers a period of five days to "book"
orders, that is, secure options to purchase at the old price, and a
period of thirty days in which to take delivery upon the options.
The Commission
Page 324 U. S. 740
charged that petitioners have further violated § 2(a) of the
Clayton Act, as amended, by permitting certain favored customers to
secure options for the purchase of glucose, and to take delivery at
the old price, for periods longer than those usually permitted to
other customers. The Commission also charged other violations of §
2(a) in that petitioners favored certain tank wagon customers by
permitting them to book orders at the lower prices charged for tank
car deliveries, and to take deliveries by tank wagon over extended
periods of time. The Commission found, upon ample evidence, that
these discriminations were in fact made by petitioners.
Petitioners assert that the practices prohibited by § 2(a) are
discriminations in price, and not in the terms and conditions of
sale other than price. They rely on the fact that in the course of
the progress of the Robinson-Patman bill through Congress, the
phrase "terms of sale," originally included in the prohibited
discriminations, was stricken from the bill. But even if the
contention be accepted, we cannot ignore the fact that the present
discriminations in the terms of sale operated to permit the favored
customers to purchase at a lower price than other customers, so
that their only practical effect was to establish discriminations
in price, precisely the evil at which the statute was aimed. And
the Conference Committee, in reporting on this elimination of the
phrase "terms of sale" from the bill, made it clear that § 2(a)
still applied to indirect as well as direct discriminations in
price. It said that, with the elimination of the phrase "terms of
sale," the act is inapplicable to "terms of sale except as they
amount in effect to the indirect discriminations in price within
the meaning of the remainder of subsection (a)." H.Rep. No. 2951,
74th Cong., 2nd Sess., p. 5.
Petitioners also contend that these sales to favored customers
were to meet the competition of other sellers of glucose, and were
therefore excepted from the prohibition
Page 324 U. S. 741
of § 2(a), by the proviso of subsection (b) of § 2 of the
Clayton Act, as amended. Subsection (b) provides:
"Upon proof being made at any hearing on a complaint under this
section that there has been discrimination in price . . . , the
burden of rebutting the prima facie case thus made by showing
justification shall be upon the person charged with a violation of
this section, and unless justification shall be affirmatively
shown, the Commission is authorized to issue an order terminating
the discrimination:
Provided, however, That nothing herein
contained shall prevent a seller rebutting the prima facie case
thus made by showing that his lower price . . . was made in good
faith to meet an equally low price of a competitor. . . ."
The only evidence said to rebut the
prima facie case
made by proof of the price discriminations was given by witnesses
who had no personal knowledge of the transactions, and was limited
to statements of each witness' assumption or conclusion that the
price discriminations were justified by competition. Examination of
the testimony satisfies us, as it did the court below, that it was
insufficient to sustain a finding that the lower prices allowed to
favored customers were in fact made to meet competition. Hence,
petitioners failed to sustain the burden of showing that the price
discriminations were granted for the purpose of meeting
competition.
Cf. Federal Trade Commission v. A. E. Staley Mfg.
Co., post, p.
324 U. S. 746.
Finally, it is contended that there was no evidence to support
the Commission's finding, which was referable to these practices as
well as petitioners' basing point practices, that the
discriminations in price may diminish competition within the
meaning of § 2(a). This finding as to the effect of both types of
discrimination was based on the same stipulation of facts which we
have already considered in connection with the basing point
practices.
Page 324 U. S. 742
Since the customers here are the same manufacturers of
low-priced candies as were there involved, and since the price
discriminations here are relatively substantial in a field where
differences of a fraction of a cent in the price of candy are
sufficient to divert business from one manufacturer to another, we
think that the stipulation, which we find to be applicable to these
as well as the basing point practices, is sufficient to support the
finding of the prescribed effect on competition.
III
.
Discounts to Purchasers of By-products
Still other price discriminations by petitioners charged and
found by the Commission were discounts allowed to certain favored
purchasers of gluten feed and meal, byproducts of petitioners'
refining of corn, and other discounts allowed to certain favored
purchasers of starch and starch products. It was not and is not
contended that these allowances were due to differences in the cost
of manufacture, sale or delivery. But it is asserted that these
discriminations did not violate § 2(a), since there was not the
requisite effect on competition.
It was stipulated, and the Commission found, that the allowances
in question were "sufficient," if and when reflected in whole or in
substantial part in resale prices, to attract business to the
favored purchasers away from their competitors, "or to force
[their] competitors to resell . . . at a substantially reduced
profit, or to refrain from reselling." But it is asserted that
there is no evidence that the allowances ever were reflected in the
purchasers' resale prices. This argument loses sight of the
statutory command. As we have said, the statute does not require
that the discriminations must in fact have harmed competition, but
only that there is a reasonable possibility that they "may" have
such an effect. We think that it was permissible for the Commission
to infer that these discriminatory allowances were a substantial
threat to competition.
Page 324 U. S. 743
IV
.
Advertising Allowances
The Commission also charged and found that petitioners violated
§ 2(e) of the Clayton Act, which provides:
"(e) . . . it shall be unlawful for any person to discriminate
in favor of one purchaser against another purchaser or purchasers
of a commodity bought for resale, with or without processing, by
contracting to furnish or furnishing, or by contributing to the
furnishing of, any services or facilities connected with the
processing, handling, sale, or offering for sale of such commodity
so purchased upon terms not accorded to all purchasers on
proportionally equal terms."
The alleged violation consisted of advertising expenditures made
by petitioners for the Curtiss Candy Company in order to promote
the sale of dextrose or corn sugar for use in candy manufacture.
For this purpose, petitioners entered into an arrangement with the
Curtiss Candy Company, whereby, during the years 1936 to 1939, they
spent over $750,000 in advertising Curtiss candy as being "rich in
dextrose." At the same time, Curtiss advertised its candy as being
"rich in dextrose" and made the same statement on its labels. While
Curtiss was free to purchase dextrose used in the advertised
candies from other manufacturers, it in fact made all such
purchases from petitioners, in annually increasing quantities until
it purchased a total of seven million pounds in 1939. During the
same period, it purchased of petitioners large quantities of
glucose, the purchases increasing from nothing in 1937 to almost
fifteen million pounds in 1939. Although petitioners sold dextrose
to others, it did not furnish proportionally equal advertising
services to them.
Petitioners say that the advertising arrangement is not
forbidden by § 2(e) because it was not made with the Curtiss Candy
Company as a "purchaser." But, during the period in question, the
Curtiss Company was in fact a purchaser of petitioners' commodity.
The Commission could
Page 324 U. S. 744
properly infer that the advertising for which petitioners paid
contemplated the sale of that commodity of Curtiss, and that the
advertising contemplated the offering for sale of the candy by
Curtiss. Petitioners thus furnished a service connected with the
sale or offering for sale of a commodity upon terms not accorded to
other purchasers. The statute does not require that the
discrimination in favor of one purchaser against another shall be
provided for in a purchase contract or be required by it. It is
enough if the discrimination be made in favor of one who is a
purchaser and denied to another purchaser or other purchasers of
the commodity.
It is said also that the Curtiss Company was not a purchaser of
a commodity "bought for resale, with or without processing" within
the meaning of § 2(e), since the Curtiss Company buys dextrose from
petitioners, but uses it with other ingredients to produce candy,
an entirely new commodity, which it sells. While the Act does not
define the term "processing," the conversion of dextrose into candy
would seem to conform to the current understanding that processing
is a mode of treatment of materials to be transformed or reduced to
a different state or thing.
See Cochrane v. Deener,
94 U. S. 780,
94 U. S. 788.
In view of the purpose of the statute to prevent the enumerated
discriminations attending the sale of a commodity for resale, the
precise nature or extent of the processing before resale would seem
to be immaterial. The statute is aimed at discrimination by
supplying facilities or services to a purchaser not accorded to
others, in all cases where the commodity is to be resold, whether,
in its original form or in a processed product. The evils of the
discrimination would seem to be the same whether the processing
results in little or much alteration in the character of the
commodity purchased and resold.
And, finally, it is said that the Commission was without
jurisdiction because the dextrose sold by petitioners to
Page 324 U. S. 745
Curtiss was not found to have been sold in interstate commerce;
that, if the section is construed to apply to such transactions, it
would be unconstitutional, and that, in any case, there is no
showing that the transaction complained of, although not themselves
in interstate commerce, have in any way affected such commerce. But
the effect upon the commerce is amply shown by the interstate and
national character of the Curtiss Company's business; by
petitioners' advertising for Curtiss, which was itself frequently
in interstate commerce, amounting to $750,000, and by Curtiss' own
admission that it competed in the sale of its candy in interstate
commerce with all manufacturers of one cent and five cent bars of
candy. Moreover, some of petitioners' sales to other companies to
whom these allowances were not accorded were made in interstate
commerce; thus, there was a discrimination against sales in
interstate commerce well within the power of the Commission to
remedy.
Petitioners make a number of other arguments or contentions of
lesser moment which we have considered but find it unnecessary to
discuss. We conclude that the advertising furnished by petitioners
was a service or facility "connected with the processing . . .
sale, or offering for sale" of the commodity purchased by the
Curtiss Company upon terms not accorded to other purchasers, and
therefore violated the statute.
The several violations of §§ 2(a) and 2(e) of the Clayton Act
found by the Commission, sustained by the court below, and brought
here for review fall within the prohibitions of the Act. The
Commission's conclusions are amply supported by its findings and
the evidence, and the judgment is
Affirmed.
MR. JUSTICE ROBERTS took no part in the consideration or
decision of this case.
MR. JUSTICE JACKSON concurs in the result.
[
Footnote 1]
The illustrative prices found by the Commission show this
sharply varying factory net and also the amounts of phantom
freight. The figures given are upon deliveries from Kansas City for
August 1, 1939, when the Chicago base price was $2.09.
bwm:
-----------------------------------------------------------------------------------------
A B C D E F
-----------------------------------------------------------------------------------------
Delivered Net to
Price Petitioners Variance in Phantom
(Chicago Actual At Factory Petitioners' Freight
Freight Base Freight in Kansas Net from (Column
from Price, from City their Net on A minus
Chicago $2.09 plus Kansas (Column Deliveries Column
Column City B minus at Kansas C)
A) Column C) City
-----------------------------------------------------------------------------------------
Kansas City, Missouri $0.40 $2.49 $0.00 $2.49 $0.00 $0.40
St. Joseph, Missouri .40 2.49 .09 2.40 -.09 .31
Springfield, Missouri .40 2.49 .36 2.13 -.36 .04
Fort Smith, Arkansas .65 2.74 .45 2.29 -.20 .20
Hutchinson, Kansas .61 2.70 .36 2.34 -.15 .25
Lincoln, Nebraska .45 2.54 .13 2.41 -.08 .32
Sioux City, Iowa .40 2.49 .24 2.25 -.24 .16
Waco, Texas .85 2.94 .63 2.31 -.18 .22
Sherman, Texas .77 2.86 .54 2.32 -.17 .23
San Antonio, Texas .88 2.97 .69 2.28 -.21 .19
Denver, Colorado .66 2.75 .56 2.19 -.30 .10
Salt Lake City, Utah .77 2.86 .67 2.19 -.30 .10
-----------------------------------------------------------------------------------------
ewm:
[
Footnote 2]
The report said: "Section 3 authorizes nothing which that
amendment [to § 2 of the Clayton Act] prohibits, and takes nothing
from it."