In a suit by a seller against a buyer on notes given for the
accumulated balance remaining on a running account of sales and
credits over a period of years, it is no defense that the seller
had engaged in price discriminations against the buyer in violation
of the Robinson-Patman Act, which prescribes criminal penalties and
entitles injured persons to triple damages, but does not expressly
make the contract of sale illegal or the purchase price
uncollectible. Pp.
330 U. S.
750-757.
155 Fla. 877, 22 So. 2d 461, affirmed.
The Supreme Court of Florida affirmed a judgment on certain
notes for the unpaid balance of the purchase price of goods. 155
Fla. 877, 22 So. 2d 461. This Court granted certiorari, 326 U.S.
711, and affirmed the judgment below by an equally divided Court.
327 U.S. 758. It granted a rehearing and restored the cause to the
docket for reargument before a full bench. 327 U.S. 812.
Affirmed, p.
330 U. S.
757.
Page 330 U. S. 744
MR. JUSTICE JACKSON delivered the opinion of the Court.
The federal question which survives proceedings in the Florida
state courts is whether renewal notes representing the purchase
price of goods sold and delivered are uncollectible if it is found
that the vendor violated the Robinson-Patman Act, 49 Stat. 1526,
1528, 15 U.S.C. §§ 13, 13a.
Bruce is a canner and, over a period of years, bought its cans
chiefly from The American Can Company. A debt accumulated which was
put into promissory notes, and on one or more occasions, they were
renewed, reduced by amounts which had been paid. Upon eventual
default, two suits, later consolidated, were brought on renewal
notes aggregating about $114,000. As to each note, Bruce pleaded in
defense that "the consideration for said notes is illegal and said
notes void and of no force and effect." This was said to be for the
reason that the Can Company had sold to others at prices which
discriminated against Bruce, and thereby violated the
Robinson-Patman Act.
The alleged discrimination chiefly relied upon consisted of
quantity discounts. Annual purchases by Bruce
Page 330 U. S. 745
were about $350,000. Some other canners bought much larger
quantities. The Can Company's contract with all its customers
allowed a discount of 1% on annual purchases of $500,000, and
nothing to those whose purchases were less than that. It was so
graduated as to give a maximum discount of 5% to a customer whose
purchases were $7,000,000 a year. The consequence is that
relatively small packers pay 5% more for their cans than their
largest competitors.
It is claimed that this advantage to quantity buyers renders the
quantity discount
per se a violation of the
Robinson-Patman Act. To sustain the defense in this case, it would
be necessary to so hold. It is not denied that Bruce got the same
discounts as other purchasers of like quantities when it qualified,
and, in one year, Bruce was in the $500,000 bracket and received
the 1% Discount. It is not claimed that the Can Company failed to
give discounts where earned under this uniform contract, or that
discounts were given where not so earned. Bruce received the same
discounts as others within its classification, and it is not
questioned that, had it been a purchaser of larger quantities, it
would have been allowed the same discount as other purchasers of
that class.
Before a court could sustain the defense in this particular
case, it would also have to overcome other difficulties of law and
fact. The Act does not prohibit all quantity discounts, but
expressly permits them under certain conditions. It indicates, too,
that the Federal Trade Commission is the appropriate tribunal to
hear in the first instance the complicated issues growing out of
grievances against a quantity discount practice of a seller. 49
Stat. 1526, 15 U.S.C. § 13(a). Quantity discounts are among the
oldest, most widely employed and best known of discount practices.
They are common in retail trade, wholesale trade, and
manufacturer-jobber relations. They are common in regulated, as
well as unregulated,
Page 330 U. S. 746
price structures. Congress refused to declare flatly that they
are illegal. They become illegal only under certain conditions, and
when they are illegal, it is as much a violation to accept or
receive as to allow them. Bruce, in one of the years included in
its balance of account, purchased more than a half million dollars
of cans on which it received precisely the kind and amount of
discount it now asserts to be illegal.
The argument is made that such a remedy as Bruce seeks here
would support the anti-monopoly policy of Congress. But Bruce is
not complaining of the high price of cans. Bruce complains of a
lower price for cans to others -- which would enable competitors to
put their products on the market cheaper. This may well put Bruce
to some disadvantage, but it does not follow that Congress would
forbid the savings of large-scale mass production to be passed
along to consumers. The economic effects on competition of such
discounts are for the Trade Commission to judge. Until the
Commission has determined the question, courts are not given
guidance as to what the public interest does require concerning the
harm or benefit of these quantity discounts on the ultimate public
interests sought to be protected in the Act. It would be a
far-reaching decision to outlaw all quantity discounts. Courts
should not rush in where Congress feared to tread.
Because of a more fundamental defect in petitioner's case,
however, the Court does not find it necessary to consider the
effect of these features of the Act on this case, as would be
necessary before a conclusion could be reached that petitioner
should win on the merits. On the questions of fact, considerable
evidence was taken at pretrial hearings, and the parties are in
dispute as to whether the decision thereon was a final judgment,
and, if so, as to whether the defense was not also adjudicated to
be insufficient on the facts. Although the record is
unsatisfactory,
Page 330 U. S. 747
we take it that all of the sales evidenced by the notes were
made after the passing of the Robinson-Patman Act. It appears,
however, that the notes are not identified with any particular
sale, but represent a balance remaining on a running account of
sales and credits in many of which a claim of discrimination might
not be supportable. The indebtedness they supplant is conceded to
have been incurred before February, 1940. The purchases covered at
least a four-year period and involved two types of cans. The
purchase price which Bruce asks us to excuse it from paying is not
identified either as to type of can or date of transaction. But
petitioner contends that it is not necessary in proving a
discrimination to show that others received a different discount on
the same type of can at approximately the same time "because the
scheme of discount by aggregate dollar volume of annual sales
comprehends all cans bought whatever their size or price." To
sustain this position would mean that a sale to a competitor of
large cans in 1940 at a higher discount invalidated a sale of small
cans to petitioner in 1936, so that petitioner need not pay the
contract price for cans delivered that year. The contention is
simply that, if some purchasers got larger discounts on any bill
for cans than petitioner got, the bill against petitioner and notes
in settlement and extension of it are uncollectible.
However, for the purposes of this decision, in view of the
uncertain nature of the proceedings below, we assume, but do not
decide, that the defense on the facts has been or could be
established as pleaded. We do not decide whether the quantity
discount plan, whatever the facts were, violated the
Robinson-Patman Act. The sole question we decide is whether notes
given for purchases are unenforceable if the quantity discount plan
violates the Act. Petitioner suggests that the Court may take two
paths to the answer, but that the answer will be yes. The
Page 330 U. S. 748
broad ground petitioner offers is "that a transaction unlawful
under the Robinson-Patman Act constitutes criminal conduct upon
which no money judgment can be based." Petitioner also offers a
narrow ground on which we can yet decide in its favor. "But, if it
be admitted that the buyer [
sic] is entitled to the fair
value of the goods," petitioner says, respondent probably already
has been paid the fair value of all the cans bought in 1936-40.
When that value has been determined by the trial court, it urges,
it will be found that the amount in notes is substantially
equivalent to the amount of discrimination in discount. [
Footnote 1]
In effect, petitioner is treating the $114,000 in notes as
representing the discount it claims it should have gotten on its
1937-42 purchases of $2,000,000. This alternative argument is that
petitioner is liable only for the fair value of all the cans it
bought, and, in this suit, it asks the courts to determine what
that fair value was. But the fact is that, as to the transactions
for which petitioner paid $2,000,000, it has already paid the
agreed price. Those transactions cannot be identified with
particularity, but they were paid for at respondent's prices.
Petitioner did not allege and does not contend that the notes
represent specific transactions, or that the sales for which they
were given could be identified. Mr. Bruce conceded in his testimony
that the notes simply represent a balance of an account which
mingled the prices of individual transactions. [
Footnote 2]
Page 330 U. S. 749
In its brief here, petitioner's only response to respondent's
statement that "[n]one of the original notes . . . had been tied to
a particular transaction" is that "[t]he record shows that all of
the notes are tied to the entire series of transactions." There may
be substantial equivalence numerically in the amount of the notes
and the amount of alleged discrimination, but it cannot be said
that the notes represent the separate item of price discrimination.
[
Footnote 3]
Page 330 U. S. 750
The Act prescribes sanctions, and it does not make
uncollectibility of the purchase price one of them. Violation of
the Act is made criminal and upon conviction a violator may be
fined or imprisoned. 49 Stat. 1528, 15 U.S.C. § 13a. Any person who
is injured in his business or property by reason of anything
forbidden therein may sue and recover three-fold the damages by him
sustained and the costs of suit, including a reasonable attorney's
fee. 38 Stat. 731, 15 U.S.C. § 15. This triple-damage provision to
redress private injury and the criminal proceedings to vindicate
the public interest are the only sanctions provided by
Congress.
It is contended that we should act judicially to add a sanction
not provided by Congress by declaring the purchase price of goods
uncollectible where the vendor has violated the Act. It may be
admitted, as argued, that such a sanction would be an effective
enforcement provision. Addressed to Congress, this argument might
be persuasive, but the very fact that it would obviously be an
effective sanction makes it even more significant that
Page 330 U. S. 751
the Act made no provision for it; that no committee dealing with
the Robinson-Patman Act proposed it; that not one word suggesting
its consideration appears in the debates of Congress; no proponent
of the Act pointed out in its favor that it would be self-enforcing
because of this sanction, and no opponent pointed with alarm to the
consequences of such a drastic sanction on the commerce of the
nation. On the contrary, a proposed provision of the Act, passed
only by the Senate, which later receded, shows that Congress gave
consideration to no sanction more extreme than to compel the
remission of the excess charged.
See S. 3154, § 2(d), 74th
Cong., 1st Sess., S.Rep. No. 1502, 74th Cong., 2d Sess., p. 8;
Conference Rep. H.Rep. No. 2951, 74th Cong., 2d Sess., p. 8.
Congress declined to adopt this relatively moderate provision, and
at no time does it appear that either house of Congress wanted to
go so far as to permit a buyer to get goods for nothing.
Where the interests of individuals or private groups or those
who bear a special relation to the prohibition of a statute are
identical with the public interest in having a statute enforced, it
is not uncommon to permit them to invoke sanctions. This stimulates
one set of private interest to combat transgressions by another
without resort to governmental enforcement agencies. Such remedies
have the advantage of putting back of such statutes a strong and
reliable motive for enforcement, which relieves the Government of
cost of enforcement. Such private remedies lose, of course,
whatever advantage there may be in the presumed disinterested
public interest standards and expertness of a governmental agency
which has the initiative control of retributory measures. It is
clear Congress intended to use private self-interest as a means of
enforcement, and to arm injured persons with private means to
retribution when it gave to any injured
Page 330 U. S. 752
party a private cause of action in which his damages are to be
made good three-fold, with costs of suit and reasonable attorney's
fee.
Bruce, it appears, already has undertaken the triple damage suit
remedy against the Can Company.
Bruce's Juices, Inc. v.
American Can Co., No. 569, Civ. T., S.D. Fla., 1942. To
indicate its need that the Court establish this additional remedy
unauthorized by Congress, it seeks to discredit and belittle both
of the remedies Congress has expressly authorized. It says,
"The triple damage suit is likely to prove protracted and
expensive; damages caused by a disadvantageous competitive position
are so speculative as to be usually unprovable. Nor can the buyer
rely for protection upon the action of the government. The
Department of Justice or the Federal Trade Commission may never get
around to the matter."
It is a little dubious whether the sort of remedy which has been
in litigation over four years in this case, which Bruce asks us to
reverse and send back again, is an antidote for "protracted and
expensive" triple-damage suits. Moreover, if Bruce can in this suit
prove that the prices respondent charged were illegal, as it must
in order to win, it can do the same in a triple-damage suit. The
damages sustained because of discrimination are no more
"speculative" nor "unprovable" in one suit than in the other, and
their establishment in the statutory form of action carries a
bonus.
Annexation of the proposed defense to the statute by
implication, either as an inference of unexpressed intention of
Congress or as the result of some doctrine of common law, would be
justified only if it would be at least a rational,
nondiscriminatory, and appropriate means of making the policy of
the statute effective. To allow a buyer to get his goods for
nothing because the seller violated the Act by giving someone else
a greater discount, does not meet this test.
Page 330 U. S. 753
It would seem that one test of the rationality and
appropriateness of such a defense because of a violation of the Act
would be that the reparation it permits should be measured at least
roughly by the extent of the injury caused by the violation. This,
of course, is the principle of the suit for triple damages. But
that is not the principle of the defense here urged. The extent of
its indemnity is not measured by injury, and not measured by the
dealings affected with the alleged violation. It is measured solely
by the amount of credit the buyer obtained from the seller. The
seller would lose the amount carried in notes or in open account.
Had Bruce's delinquency been greater, so would its gain; had there
been no credit asked or given, the buyer could have had no remedy
by way of defense. The obvious consequence would be to discourage
vendors from extending credit where the operation of this rather
difficult statute is in doubt. Since the danger of loss under the
proposed remedy is greatest in the case of small buyers who get
small discounts, the consequence would be to deny the small buyers
credit, and trust only those who, having the largest discounts,
would be least likely to defend on a claim of violation. This
result would hardly comport with the argument, so much dwelt upon
by petitioner, that its status is that of a small business concern
trying to battle a business giant. But we cannot suppose that
"little fellows" are always buyers, and only giants sell goods.
Bruce itself is a seller of canned goods, and if its trade
practices include quantity discounts, this "little" canner might be
on the other side of the same issue trying to collect against a
small wholesaler who had less discount than a larger one. To decide
issues of law on the size of the person who gets advantage or
claims disadvantage is treacherous.
This construction which would make a grant of credit a point of
vulnerability could be avoided only by holding that the whole
purchase price, not merely that involved
Page 330 U. S. 754
in the credit, is uncollectible and recoverable, even if
voluntarily paid. In that case, the volume of the transaction,
rather than the volume of the credit extended, would measure the
loss a seller might suffer from violating the Act.
But, of course, if the discount system of the Can Company makes
all of the Bruce purchases illegal and the price thereof
recoverable, all sales to others under the discount system must be
similarly tainted. It is hard to see how any of the Can Company's
sales are valid if these to Bruce are void on the theory advanced.
If this view is taken, certainly the remedy would soon end illegal
quantity business discounts -- by ending the business. We do not
believe Congress has contemplated so deadly a remedy, or has left
the way open to us by judicial edict to dislocate business as such
a holding would do. It must not be forgotten that such a decision
would have retroactive effect for several years, and unsettle many
accounts. We cannot justify a judicial declaration to this
effect.
But, if only a few cases are to be unsettled -- those, say, in
positions similar to Bruce's -- what becomes of the policy of
nondiscrimination? Other canners who have paid cash find themselves
competing with Bruce, who is absolved from paying for a very large
part of its cans -- something like one-third of its annual dollar
volume being involved in this case. In other words, as penalty for
establishing a uniform one to five percent discount, the Can
Company would be obliged to give Bruce something over a 30%
discount on one year, or about 5% on all purchases shown by the
evidence ever to have been made.
It is urged that holdings under the Sherman Anti-Trust Act
supply an analogy for allowing this defense under the
Robinson-Patman Act. The former provides, among other things, that
every contract in restraint of trade or commerce "is hereby
declared to be illegal." 26 Stat. 209,
Page 330 U. S. 755
50 Stat. 693, 15 U.S.C. § 1. This Court has held that, where a
suit is based upon an agreement to which both defendant and
plaintiff are parties, and which has as its object and effect
accomplishment of illegal ends which would be consummated by the
judgment sought, the Court will entertain the defense that the
contract in suit is illegal under the express provision of that
statute.
Continental Wall Paper Co. v. Louis Voight & Sons
Co., 212 U. S. 227.
Cf. Sola Electric Co. v. Jefferson Electric Co.,
317 U. S. 173. But
when the contract sued upon is not intrinsically illegal, the Court
has refused to allow property to be obtained under a contract of
sale without enforcing the duty to pay for it because of violations
of the Sherman Act not inhering in the particular contract in suit,
and has reaffirmed the
"doctrine that, 'where a statute creates a new offense and
denounces the penalty, or gives a new right and declares the
remedy, the punishment or the remedy can be only that which the
statute prescribes.'"
D. R. Wilder Mfg. Co. v. Corn Products Refining Co.,
236 U. S. 165,
236 U. S.
174-175;
Connolly v. Union Sewer Pipe Co.,
184 U. S. 540.
Moreover, no single sale can violate the Robinson-Patman Act. At
least two transactions must take place in order to constitute a
discrimination. Thus, a contract may be made today which has no
legal defect under the Robinson-Patman Act. A week later, another
sale may be made at a different price or at a different discount,
and the latter taken into consideration with the former may
establish a discrimination. Whether a sale would be rendered void
only because of simultaneous discrimination or preexisting ones, or
whether a contract valid when made becomes void by reason of later
transactions, and, if so, how much later, are questions we need not
decide now. It is plain that the violation, if there was one, is
not inherent in the contract sued upon, whether it be the notes or
the sale of the goods, but can only be found in different
transactions
Page 330 U. S. 756
which a party to the litigation had with third persons who are
not parties. No such defense has been approved under the Sherman
Act, and, furthermore, these characteristics show that the entire
basis for judging under the two Acts is different, and that the
case law as to the Sherman Act does not fit the Robinson-Patman
Act.
Nonetheless, we are urged to supply judicially the sanction of
invalidating obligations to pay for goods sold and delivered
because, it is said, otherwise the courts become parties to the
enforcement of a discrimination. If, in order to prove his own
case, a plaintiff proves his violation of law, then no court will
aid the plaintiff to recover. [
Footnote 4] Here, however, what the plaintiff must show is
the notes which import consideration. If consideration is denied,
he can prove that cans were sold and delivered at a stated price.
That is no violation of law. It is only when the Court goes outside
of the dealings between plaintiff and defendant and it is proved
that the same kind of cans were sold to others at different prices
within a relevant period of time, amounting to a discrimination --
a fact unnecessary to sustain the plaintiff's cause of action --
that the basis of the defense asserted here appears. The Court does
not give its approval to transactions between one of the litigants
and a third party just because it holds them irrelevant in this
litigation.
The defendant's claim to be freed of the obligation to pay his
promissory note because the payee, as vendor of cans, made sales to
others that, when compared with sales
Page 330 U. S. 757
to itself may be held unlawfully discriminatory, cannot be
supported as resting on any congressional word or policy. Not only
was this remedy not named by Congress, but it would be surprising
if it had been, in view of the remedies Congress did give. We have
assumed for the purposes of this case that petitioner could
establish that the prices respondent charged were discriminatory,
so that they violated the Act. But if petitioner can show that,
clearly it would be entitled to recover in a triple damage suit
supported by the same evidence. For, despite petitioner's complaint
on the difficulty of proving damages, it would establish its right
to recover three times the discriminatory difference without
proving more than the illegality of the prices. If the prices are
illegally discriminatory, petitioner has been damaged, in the
absence of extraordinary circumstances, at least in the amount of
that discrimination. No reason suggests itself why Congress should
have intended a remedy by which the victim of discrimination could
recover by defense only one-third of what he could recover, on the
same proof, by offense. The inducement of thrice the damages
suffered may bring the sufferer to aid in enforcement of the
statute. To assure his help, however, it would hardly be thought
appropriate to offer him the choice of taking only one-third that
amount. Since the remedy embodied in petitioner's second theory
would be but a weak one-third shadow of the one Congress expressly
gave, we cannot see the need for judicial reduplication in
miniature. We hold that federal law does not support the defense
alleged, and the judgment of the Florida Supreme Court is
Affirmed.
[
Footnote 1]
On petitioner's first theory, clearly no recovery on
quantum
meruit could be had. The general rule is that a transaction
wholly illegal will not support such a suit.
See
Williston, Contracts (Rev. ed., 1938) § 1786A; Restatement,
Contracts, § 598, Comment
c. And, on Bruce's second
theory, because of the leniency with which respondent extended
credit, it would be impossible for respondent to show which cans
the notes represent and it would, of course, be unable to establish
their fair value. If we hold the notes uncollectible, therefore,
respondent could not recover on
quantum meruit, and Bruce
would get a windfall.
[
Footnote 2]
His testimony on this point follows:
"Q. Mr. Bruce, do the notes evidence the purchase price of any
particular size of cans you purchased from the American Can
Co.?"
"A. There is nothing on the face of the notes that shows what
size they were."
"Q. During that period, you purchased a certain size can?"
"A. It was purchased during a certain period."
"Q. Did you run a separate account on the grocery can and on the
soft drink can, or small and large?"
"A. No sir."
"Q. The notes themselves simply represent that account,
irrespective of the size of the cans?"
"A. Yes sir, the blanket way."
"Q. In a blanket way. In other words, there was no distinction
made in your account between the large and small cans -- I mean, in
the indebtedness?"
"A. Not while the notes were accruing."
"Q. In other words, the notes in question are for the purchase
price of both large and small cans?"
"A. That is right."
[
Footnote 3]
If the notes are considered alternatively as representing
respondent's price due on the latest purchases to that amount in
late 1939 and early 1940, petitioner, on its theory, would be
entitled to be excused payment of only about 5% Of the $114,000,
because it is defending on the ground that it ought not to pay the
allegedly discriminatory part of the price. But, even for this
limited purpose, it cannot be established what cans the $114,000
represents, so the court could not determine their fair value.
In
Penn-Allen Cement Co. v. Phillips, 182 N.C. 437, 109
S.E. 257, the specific sales were identified and the price unpaid.
The court there held only that the buyer should be excused payment
of the discriminatory part of the contract price. But the opinion
was given after the court had decided that the appeal was
prematurely taken.
The defendant had counterclaimed for treble damages, computed on
the basis of the alleged overcharge. The plaintiff urged that
treble damages could not be recovered in an action for the purchase
price, but that the defendant must pay first, and then sue on that
claim. The court said simply, "This matter also has not been passed
upon by the court below, and there is nothing for us to consider."
182 N.C. at 441, 109 S.E. at 259. But if the court was right in
holding that plaintiff could not recover the overcharge, it would
necessarily follow that the counterclaim should have been
dismissed. For, without paying the overcharge, the defendant would
have had no basis on which to rest its claim that it had been
damaged in that amount, and therefore entitled to treble
compensation.
[
Footnote 4]
In
McMullen v. Hoffman, 174 U.
S. 639, for example, the Court refused to enforce a
partnership contract which was based on an illegal and fraudulent
agreement to submit collusive bids for public construction. The
plaintiff argued that the partnership contract itself did not
disclose any illegality, but even that was questionable. The Court,
moreover, held that the agreement to be partners could not be
separated from the general collusive agreement which gave rise to
it. Agreements with third persons, not parties to the suit,
however, were not relied upon by Court or litigants.
MR. JUSTICE MURPHY, dissenting.
The issue in this case is whether sellers of goods should be
allowed to use the courts to collect price differentials which have
been made illegal by Congress in the Robinson-Patman
Page 330 U. S. 758
Act. The Court approaches, but never quite meets, that issue.
But the unmistakable effect of the Court's decision is to permit
the recovery of discriminatory prices despite the plain language
and policy of the Act and despite the lessening of competition that
might thereby result. I remain unconvinced, however, that such a
result is consistent with the high ideals of our judicial system,
or that it is made necessary by any rule of law or policy.
Section 3 of the Act makes it unlawful for any person to be a
party to any sale which discriminates, to his knowledge, against
competitors of a purchaser by granting to that purchaser "any
discount, rebate, allowance, or advertising service charge" not
available to the competitors in respect of a sale of goods of like
grade, quality, and quantity. 15 U.S.C. § 13a. Section 2(a) of the
Clayton Act, as amended by the Robinson-Patman Act, makes it
unlawful for any person "to discriminate in price between different
purchasers of commodities of like grade and quality" where the
result is to lessen competition or to tend to create a monopoly. 15
U.S.C. § 13(a). It is in light of these statutory provisions that
we must examine the opinion of the Court.
1. The Court proceeds on the basic assumption, unsupported by
the record or by petitioner's contentions, that the petitioner is
seeking to avoid all liability for the cans sold to it by the
respondent. No such assumption is justified. Petitioner's brief, it
is true, suggests two alternative theories in support of its
position: (1) a transaction unlawful under the Robinson-Patman Act
constitutes criminal action upon which no money judgment can be
based; (2) discriminatory prices over and above the fair value of
the goods cannot be collected by the seller. But petitioner does
not pursue the first alternative, pointing out that only the second
and narrower alternative is presented by the record. Thus, the only
contention really
Page 330 U. S. 759
before us is that promissory notes cannot be collected by legal
action to the extent that they represent a price differential
outlawed by Congress. As petitioner notes, this contention
"does not require the Court to decide that the entire
transaction is so tainted with illegality that the seller cannot
collect even the fair value of the goods, thus giving the buyer a
windfall."
If the petitioner were to prevail in this case and the
promissory notes were to be declared unenforceable, respondent
would still be free to recover on a
quantum meruit basis
if it has not already so recovered.
See Penn-Allen Cement Co.
v. Phillips & Sutherland, 182 N.C. 437, 109 S.E. 257.
Moreover, there is a strong indication that petitioner already
may have paid the respondent the fair value of the cans. Since the
passage of the Robinson-Patman Act, petitioner has had a continuing
account with the respondent; under that account, petitioner paid
respondent more than $2,000,000 for cans during the period from
1937 to 1942. When this suit was instituted, petitioner owed a
balance of $114,000 on this account, represented by the promissory
notes in issue here. To deny enforceability to those notes might
thus affect only the discriminatory price differential, which the
Court assumes violated the Robinson-Patman Act.
It also appears that the quantity discounts in issue were based
upon the aggregate dollar value of annual sales, rather than upon
individual transactions. The discriminatory differentials had a
like basis. Hence, it is enough if petitioner can prove that the
$114,000 in notes represents an illegal differential from this
over-all standpoint.
The Court states, however, that the transactions represented by
the $114,000 cannot be identified and that this figure cannot be
said to reflect the separate item of price discrimination. But such
sentiments are necessarily premature in the present posture of the
case; petitioner
Page 330 U. S. 760
has not yet had a full opportunity to present all its evidence
or to try to connect the notes with a discriminatory differential.
Petitioner concededly has the burden of proving that the $114,000
in notes does represent the discriminatory part of the purchase
price, whether in relation to specific transactions or to the
aggregate dollar volume of annual sales. If it cannot so prove, its
case collapses. The important and the only point now is that
petitioner should be given the chance to prove this defense. We
should not shut the court's door in petitioner's face before it has
had that chance. Nor should we prejudice that defense by holding or
intimating that proof is impossible. Certainly the right to offer
and prove a defense is not to be denied because a court thinks that
the purported defense has not yet been proved. It is one thing to
raise a defense; it is quite another to prove it. Since we are
concerned here only with the first proposition, it is beside the
point whether the defense has been or can be proved.
We may thus dismiss as unwarranted the Court's fear that
petitioner is going to get something for nothing if its contention
is sustained. It is pleading only for the right to defend against
the collection of that which Congress has declared illegal.
2. Equally irrelevant is the Court's inquiry into whether
Congress "wanted to go so far as to permit a buyer to get goods for
nothing" where the Robinson-Patman Act has been violated. In the
case before us, the only relevant inquiry is whether the
Robinson-Patman Act was designed to allow sellers to recover
illegal price differentials through court action. A determination
that the Act precludes such a recovery does not involve a finding
that the framers of the Act desired these sellers to forfeit all
the value of the products on which they placed an illegal price
differential. It involves simply a finding
Page 330 U. S. 761
that the language and policy of the Act frown upon the use of
the courts to effectuate what Congress clearly made illegal.
3. The Court thinks it significant that the Robinson-Patman Act
makes no provision for a buyer interposing the vendor's violation
of the Act as a defense to a suit by the vendor. It is said that
the triple-damage actions and the criminal proceedings are the
exclusive sanctions provided by Congress for the enforcement of the
Act.
This overlooks the fact, however, that a specific statutory
provision is unnecessary to make an illegal contract unenforceable
in the courts. Where a contract is outlawed by statute or is
otherwise contrary to public policy, the illegality may be set up
as a defense to a suit for enforcement despite the absence of a
legislative recognition of that defense. Otherwise, the courts
would become parties to the illegality by sanctioning the
enforcement of the unlawful agreements.
McMullen v.
Hoffman, 174 U. S. 639,
174 U. S.
669-670. This principle has been applied many times by
this Court. At an early date, it was recognized that, despite the
absence of a provision in the Sherman Act authorizing a defense of
illegality in a private suit on a contract, such a defense might be
used, that
"anyone sued upon a contract may set up as a defense that it is
a violation of the act of Congress, and, if found to be so, that
fact will constitute a good defense to the action."
Bement & Sons v. National Harrow Co., 186 U. S.
70,
186 U. S. 88;
Continental Wall Paper Co. v. Louis Voight & Sons Co.,
212 U. S. 227.
Similarly, without specific statutory permission, private litigants
have been allowed to invoke the policy of the antitrust laws so as
to limit the scope of patent rights.
Mercoid Corp. v.
Mid-Continent Co., 320 U. S. 661;
Sola Electric Co. v. Jefferson Electric Co., 317 U.
S. 173;
B.B. Chemical Co. v. Ellis,
314 U. S. 495;
Morton Salt Co. v. G.S. Suppiger Co., 314 U.
S. 488;
Edward
Katzinger
Page 330 U. S. 762
Co. v. Chicago Metallic Mfg. Co., 329 U.
S. 394;
MacGregor v. Westinghouse Electric &
Mfg. Co., 329 U. S. 402.
And so when a contract or promissory note is tainted with a
violation of the Robinson-Patman Act, its enforcement should be
refused by a court -- at least to the extent of the illegality
involved. The failure of Congress to mention such a sanction slips
into insignificance in the light of precedents in analogous
situations.
4. The Court holds, however, that the Robinson-Patman Act
invalidates discrimination, rather than contracts of sale at
discount, and that the analogy of denying the enforcement of
contracts violative of other antitrust laws is imperfect.
But such a holding misconceives the very nature of the
Robinson-Patman Act and the evils at which it was directed. No one
contends that the Act makes illegal all contracts of sale at a
discount. Nor does anyone deny that an illegal discrimination
becomes apparent only after there have been two or more sales. As
the Court states, a contract may be made today which has no legal
defect under the Robinson-Patman Act. But once there are two or
more sales, and once there has been illegal discrimination, the
illegality may reach back to the first transaction, which was free
of all defects when made. That is inherent in the very nature of
discrimination, and it should not surprise us to discover that
fact. Discrimination may thus become evident in contracts,
promissory notes, open accounts, and other forms of indebtedness.
And it may put in a tangible appearance when a subsequent suit is
brought to recover, among other things, what has proved to be an
illegal price differential. To deny effect to that discrimination
in a suit by the vendor does not require that a court hold void the
entire transaction and permit the buyer to retain the goods free of
any charge. It requires only that the court refuse to permit the
recovery of that part of the
Page 330 U. S. 763
purchase price which discriminates against the buyer who
purchased the same kind and quality of goods as his
competitors.
Thus, that part of a contract of sale permitting a certain
discount may be or become illegal if the purchaser's competitors
are given larger discounts. Such is the whole tenor and policy of
the Robinson-Patman Act. And collection of the discriminatory
differential falls squarely within the area of illegality defined
by the statute. Indeed, the Act is shorn of much of its meaning if
the vendor is permitted to recover the fruits of his unlawful
conduct. Courts should not be used for that purpose any more than
they should be used to sanction recovery on contracts made wholly
void by the Sherman Act. In the one case, courts are asked to give
judgment for an unlawful price differential; in the other, they are
asked to enforce a monopolistic agreement. In both cases, the
answer should be a strong negative. The Acts are part and parcel of
the same legislative policy, the Robinson-Patman Act merely
elaborating some of the more subtle and refined monopolistic
practices which Congress desired to eliminate. Courts should treat
them accordingly.
It is no answer to say, as the Court does, that we must go
outside the transaction in issue in order to give effect to a
defense of unlawful discrimination. Of course that must be done,
for discrimination is a relative matter depending upon the vendor's
transactions with third parties. But such an inquiry must be made
by a court in suits for triple damages under the Robinson-Patman
Act.
American Can Co. v. Ladoga Conning Co., 44 F.2d 763.
And an inquiry of that type must frequently be made in private
suits where defenses are made under the Sherman Act.
Discriminations and monopolies rarely if ever appear on the face of
documents which are introduced for purposes of securing a recovery
in a court of law. Judges constantly
Page 330 U. S. 764
must look beyond the particular documents in issue. Surely, if
it be assumed that a particular discount is unlawful, no factor of
inconvenience or burden in looking at other transactions can
justify ignoring the illegality and permitting an unwarranted
recovery. And to insist that recovery must be allowed if the
plaintiff shows no violation of law in proving the amount due on a
promissory note is to hark back to medieval concepts of pleading
and practice. The Robinson-Patman Act deals with complex economic
realities. Litigants and judges must act accordingly when the Act
is properly brought into issue by a defendant. If the policy of the
Act is to be respected, the transaction before the court must be
judged on the basis of other dealings by the vendor despite the
superficial perfection of the vendor's pleadings and proof.
Nor is recovery to be denied because only part of the illegality
may be in issue. Courts must strike down illegality wherever it
appears. Statutory violations are not to be countenanced merely
because the violator seeks to reap only part of his illegal harvest
at a time.
5. The Court intimates, without actually deciding, that courts
should not allow this type of defense to be raised until the
Federal Trade Commission has determined the economic effects of
quantity discounts on competition. The fear is expressed that,
without the Commission's guidance, courts might strike down all
quantity discounts, and create untold retroactive liabilities.
The short answer is that we should be reluctant to assume that
judges are unable to comprehend the Robinson-Patman Act and the
standards it sets up in regard to quantity discounts. It may be
granted that the Federal Trade Commission has more technical
knowledge and experience in dealing with the complexities of this
problem than most courts, and the Commission's judgment would be of
inestimable value to any judge called upon to deal
Page 330 U. S. 765
with quantity discounts. But, in the absence of some action by
the Commission, courts must act as best they can within the
framework provided by Congress. The Act, 15 U.S.C. § 13(a),
specifically recognizes that quantity discounts are illegal only
where they lessen or injure competition or tend to create a
monopoly, and, where price differentials are justified by
differences in costs of manufacture, sale or delivery, the
discounts are permissible. This matter is a complex one, but it is
no more complex than many other problems which face the courts.
The only alternative to the Court's apparent position in this
respect is for judges to sit idly by and allow sellers to collect
illegal price differentials -- a function that hardly qualifies as
an ideal toward which we should strive. Indeed, if the Court's
conception of the judicial function in suits of this nature is to
be carried to its logical conclusion, judges would abdicate all
their duties under the Robinson-Patman Act whenever the Federal
Trade Commission has failed to express an opinion on the subject in
issue. They would refuse to entertain treble damage suits, and
would dismiss all criminal indictments brought on the basis of an
alleged violation of the Act. It seems to me, however, that the
judicial process has more vigor and responsibility than the Court
seems willing to imply in this case.
6. Finally, the Court indicates that the fact that petitioner is
a small business concern is a treacherous basis for deciding issues
of law. As a general proposition, there can be no dispute with that
attitude. But we must not blind ourselves to the equally important
fact that the antitrust laws, of which the Robinson-Patman Act is
an integral part, are designed primarily to aid the small business
concerns and to curb the growth of giant monopolies. Many years
ago, this Court had occasion to point out that trade and commerce
may be
"badly and unfortunately restrained
Page 330 U. S. 766
by driving out of business the small dealers and worthy men
whose lives have been spent therein, and who might be unable to
readjust themselves to their altered surroundings. More reduction
in the price of the commodity dealt in might be dearly paid for by
the ruin of such a class and the absorption of control over one
commodity by an all-powerful combination of capital."
United States v. Trans-Missouri Freight Assn.,
166 U. S. 290,
166 U. S. 323.
The same observation applies to this case. The Robinson-Patman Act
was designed in large part to protect the small business concerns,
Congress realizing the disastrous effects of their being the
victims of discriminatory prices. A proper treatment of the Act
demands appreciation of this purpose.
We should pause long before sanctioning the recovery of
discriminatory prices which Congress has found inimical to the
nation's welfare. We should be on guard against the use of the
judicial process to augment the subtle destruction of small
business contrary to the legislative will, and the erosion of the
barriers which Congress has erected against the flood-tide of
monopoly. To that end, therefore, we should reverse the judgment
below, and allow courts to give full effect to the Robinson-Patman
Act.
MR. JUSTICE BLACK, MR. JUSTICE DOUGLAS, and MR. JUSTICE RUTLEDGE
join in this dissent.