Section 2 (f) of the Robinson-Patman Act makes it unlawful for
anyone engaged in interstate commerce "knowingly to induce or
receive a discrimination in price which is prohibited" by the Act,
but the Act does not prohibit a price differential which makes only
due allowance for cost differences. The Federal Trade Commission
issued a complaint charging violation of § 2(f) by petitioner, a
large buyer of candy and confections for resale through automatic
vending machines operated in many States. At the hearing, the
Commission introduced evidence that petitioner received, and in
some instances solicited, prices that petitioner knew were as much
as 33% lower than the prices to other buyers. Petitioner's motion
to dismiss the complaint on the ground that the Commission had not
made a
prima facie case was denied, and, on petitioner's
failure to introduce evidence, the Commission entered a cease and
desist order.
Held:
1. A buyer does not violate § 2(f) if the lower prices he
induces are either within one of the seller's defenses, such as the
cost justification, or not known by him not to be within one of
those defenses. Pp.
346 U. S.
69-74.
2. Proof that the buyer knew that the price he induced or
received was lower than that offered other buyers is not sufficient
to shift to the buyer the burden of introducing evidence to show
justification. Pp.
346 U. S.
74-81.
194 F.2d 433, reversed.
In a proceeding against petitioner under § 2(f) of the
Robinson-Patman Act, 15 U.S. C. § 13, the Federal Trade Commission
entered a cease and desist order. 46 F.T.C. 861. On a petition for
review, the Court of Appeals affirmed. 194 F.2d 433. This Court
granted certiorari. 344 U.S. 809.
Reversed and remanded,
p.
346 U. S.
82.
Page 346 U. S. 62
MR. JUSTICE FRANKFURTER delivered the opinion of the Court.
The Robinson-Patman Act, directed primarily against sellers who
discriminate in favor of large buyers, includes a provision under
which proceedings may be had against buyers who knowingly induce or
receive discriminatory prices. That provision, § 2(f) of the Act,
is here for construction for the first time as a result of a
complaint issued by the Federal Trade Commission against
petitioner, a large buyer of candy and other confectionary products
for resale through 230,000-odd automatic vending machines operated
in 33 States and the District of Columbia. Petitioner, incorporated
in 1931, has enjoyed rapid growth and has attained, so we are told,
a dominant position in the sale of confectionary products through
vending machines.
The Commission introduced evidence that petitioner received, and
in some instances solicited, prices it knew were as much as 33%
Lower than prices quoted other purchasers, but the Commission has
not attempted to show that the price differentials exceeded any
cost savings that sellers may have enjoyed in sales to petitioner.
Petitioner moved to dismiss the complaint on the ground that the
Commission had not made a
prima facie case. This motion
was denied; the Commission stated that a
prima facie case
of violation had been established by proof that the buyer received
lower prices on like goods than other buyers, "well knowing that it
was being favored over competing purchasers," under circumstances
where the
Page 346 U. S. 63
requisite effect on competition had been shown. The question
whether the price differentials made more than due allowance for
cost differentials did not need to be decided "at this stage of the
proceeding." On petitioner's failure to introduce evidence, the
Commission made findings that petitioner knew the prices it induced
were below list prices and that it induced them without inquiry of
the seller, or assurance from the seller, as to cost differentials
which might justify the price differentials. The Commission
thereupon entered a cease and desist order. 46 F.T.C. 861. On
review, the Court of Appeals affirmed, [
Footnote 1] holding that the Commission's
prima
facie case under § 2(f) does not require showing absence of a
cost justification. 194 F.2d 433.
Section 2(f) of the Robinson-Patman Act, roughly the
counterpart, as to buyers, of sections of the Act dealing with
discrimination by sellers, is a vital prohibition in the
enforcement scheme of the Act. In situations where buyers may have
difficulty in proving their sellers' costs, § 2(f) could, if the
Commission's view in this case prevails, become a major reliance
for simplified enforcement of the Act not only by the Commission,
but by plaintiffs suing for treble damages. Such enforcement,
however, might readily extend beyond the prohibitions of the Act
and, in doing so, help give rise to a price uniformity and rigidity
in open conflict with the purposes of other antitrust legislation.
We therefore thought it necessary to grant certiorari. 344 U.S.
809.
Page 346 U. S. 64
Enforcement of the Clayton Act's original declaration against
price discrimination was so frustrated by inadequacies in the
statutory language that Congress, in 1936, enacted the sweeping
amendments to that Act contained in what is known as the
Robinson-Patman Act. 49 Stat. 1526, 15 U.S.C. § 13. Chief among the
inadequacies had been express exemption of price discrimination in
the sales of different quantities of like goods, an exemption that
was interpreted as leaving quantity discount sellers free to grant
discounts to quantity buyers that exceeded any cost savings in
selling to such buyers.
Goodyear Tire & Rubber Co. v.
FTC, 101 F.2d 620. In an effort to tighten the restriction
against price discrimination inimical to the public interest,
Congress enacted two provisions bearing on the issues in this case.
[
Footnote 2] It made price
discrimination in the sale of like goods unlawful without regard to
quantity, although quantity discounts, like other price
differentials, could still be justified
Page 346 U. S. 65
if they made "no more than due allowance" for cost differences
in sales to different buyers. Congress in addition sought to reach
the large buyer, capable of exerting pressure on smaller sellers by
making it unlawful "knowingly to induce or receive a discrimination
in price which is prohibited by this section."
Since precision of expression is not an outstanding
characteristic of the Robinson-Patman Act, exact formulation of the
issue before us is necessary to avoid inadvertent pronouncement on
statutory language in one context when the same language may
require separate consideration in other settings. Familiar but
loose language affords too ready a temptation for comprehensive but
loose construction. We therefore think it imperative in this case
to confine ourselves as much as possible to what is in dispute
here.
We are here asked to settle a controversy involving simply the
burden of coming forward with evidence under § 2(f) of the Act. The
record, so abundant in its instances of individual transactions
that the Commission itself felt bound to animadvert on undue
proliferation of the evidence by Government lawyers, [
Footnote 3] may be taken as
Page 346 U. S. 66
presenting varying degrees of bargaining pressure exerted by a
buyer on a seller to obtain prices below those quoted other
purchasers. In some instances, so the Commission found,
petitioner's method was to
"inform prospective suppliers of the prices and terms of sale
which would be acceptable to [petitioner] without consideration or
inquiry as to whether such supplier could justify such a price on a
cost basis or whether it was being offered to other customers of
the supplier."
46 FTC at 888. A typical instance of the maximum pressure found
by the Commission was a series of negotiations in which
representatives of petitioner sought to explain to a prospective
supplier the kind of savings he might enjoy in sales to petitioner
and might make the basis of a price differential. In such
instances, petitioner sometimes gave the supplier estimates of what
it considered "representative" percentage savings on various costs
such as freight, sales costs, packaging, and returns and
allowances. [
Footnote 4]
The Commission made no finding negativing the existence of cost
savings or stating that whatever cost savings
Page 346 U. S. 67
there were did not at least equal price differentials petitioner
may have received. It did not make any findings as to petitioner's
knowledge of actual cost savings of particular sellers, and found
only, as to knowledge, that petitioner knew what the list prices to
other buyers were. Petitioner, for its part, filed offers of proof
that many sellers would testify that they had never told petitioner
that the price differential exceeded cost savings. An offer of
proof was, in turn, made by the Commission as to the testimony of
these sellers on cross-examination; such proof would have brought
out that petitioner never inquired of its suppliers whether the
price differential was in excess of cost savings, never asked for a
written statement or affidavit that the price differentials did not
exceed such savings, and never inquired whether the seller had made
up "any exact cost figures" showing cost savings in serving
petitioner.
Petitioner claims that the Commission has not, on this record,
made a
prima facie case of "knowing inducement of prices
that made more than due allowance for cost differences," while the
Commission contends that it has established a
prima facie
case, justifying entry of a cease and desist order where the buyer
fails to introduce evidence. Before proceeding to an examination of
the statutory provisions, it is desirable to consider the kind of
evidence about which this dispute centers. Petitioner is saying, in
effect, that, under the Commission's view, the burden of
introducing evidence as to the seller's cost savings and the
buyer's knowledge thereof is put on the buyer; this burden,
petitioner insists, is so difficult to meet that it would be
unreasonable to construe the language Congress has used as imposing
it. If so construed, the statute, petitioner contends, would create
a presumption so lacking rational connection with the fact
established as to violate due process.
Page 346 U. S. 68
We have been invited to consider in this connection some of the
intricacies inherent in the attempt to show costs in a
Robinson-Patman Act proceeding. The elusiveness of cost data, which
apparently cannot be obtained from ordinary business records, is
reflected in proceedings against sellers. [
Footnote 5] Such proceedings make us aware of how
difficult these problems are, but this record happily does not
require us to examine cost problems in detail. It is sufficient to
note that, whenever costs have been in issue, the Commission has
not been content with accounting estimates; a study seems to be
required, involving perhaps stop-watch studies of time spent by
some personnel such as salesmen and truck drivers, numerical counts
of invoices or bills and, in some instances, of the number of items
or entries on such records, or other such quantitative measurement
of the operation of a business. [
Footnote 6]
Page 346 U. S. 69
What kind of proof would be required of a buyer we do not know.
The Commission argues that knowledge generally available to the
buyer from published data or experience in the trade could be used
by petitioner to make a reasonable showing of his sellers' costs.
There was no suggestion in the Commission's opinion, however, that
it would take a different attitude toward cost showings by a buyer
than it has taken with respect to sellers, and "general knowledge
of the trade," to use the Commission's phrase, unsupported by
factual analysis has as yet been far from acceptable, and indeed
has been strongly reproved by Commission accountants, as the basis
for cost showings in other proceedings before the Commission.
[
Footnote 7]
No doubt the burden placed on petitioner to show his sellers'
costs, under present Commission standards, is heavy. Added to the
considerable burden that a seller himself may have in demonstrating
costs is the fact that the data not only are not in the buyer's
hands, but are ordinarily obtainable even by the seller only after
detailed investigation of the business. A subpoena of the seller's
records is not likely to be adequate. It is not a question of
obtaining information in the seller's hands. [
Footnote 8] It is a matter of studying the
seller's business afresh. Insistence on proof of costs by the buyer
might thus have other implications; it would almost inevitably
require a degree of cooperation between buyer and seller, as
against other buyers, that may offend other antitrust policies, and
it might also expose the seller's cost secrets to the prejudice of
arm's-length bargaining in the future. Finally, not one but, as
here, approximately 80 different sellers' costs may be in
issue.
Page 346 U. S. 70
It is against this background that the present dispute arises.
The legislative setting indicates congressional recognition of the
need to charge buyers with a responsibility for price
discrimination comparable, so far as possible, to that placed on
sellers. Thus, at the least, we can be confident in reading the
words in § 2(f), "a discrimination in price which is prohibited by
this section," as a reference to the substantive prohibitions
against discrimination by sellers defined elsewhere in the Act.
[
Footnote 9] It is therefore
apparent that the discriminatory price that buyers are forbidden by
§ 2(f) to induce cannot include price differentials that are not
forbidden to sellers in other sections of the Act, and, what is
pertinent in this case, a buyer is not precluded from inducing a
lower price based on cost differences that would provide the seller
with a defense. This reading is, indeed, not seriously disputed by
the parties. For we are not dealing simply with a "discrimination
in price"; [
Footnote 10] the
"discrimination
Page 346 U. S. 71
in price" in § 2(f) must be one "which is prohibited by this
section." Even if any price differential were to be comprehended
within the term "discrimination in price," § 2(f), which speaks of
prohibited discriminations, cannot be read as declaring out of
bounds price differentials within one or more of the "defenses"
available to sellers, such as that the price differentials reflect
cost differences, fluctuating market conditions, or
bona
fide attempts to meet competition, as those defenses are set
out in the provisos of §§ 2(a) and 2(b).
This is not to say, however, that the converse follows, for §
2(f) does not reach all cases of buyer receipt of a prohibited
discrimination in prices. It limits itself to cases of knowing
receipt of such prices. The Commission seems to argue, in part,
that the substantive violation occurs if the buyer knows only that
the prices are lower than those offered other buyers. Such a
reading not only distorts the language, but would leave the word
"knowingly" almost entirely without significance in § 2(f). A buyer
with no knowledge whatsoever of facts indicating the possibility
that price differences were not based on cost differences would be
liable if in fact they were not. We have seen above that § 2(f)
does not refer to all price differentials. But we do not think that
price differentials, even as a matter of uncritical impression,
come so often within the prohibited range of price discriminations
that the language can in any way be read one way for some purposes
and another in relation to the word "knowingly."
The Commission's attempts in this case to limit the word
"knowingly" to a more reasonable area of prohibition are not, we
think, justified by the language Congress has used. The Commission
argues that Congress was attempting to reach buyers who, through
their own activities, obtain a special price and that "knowingly to
induce or receive" can be read as charging such buyers
Page 346 U. S. 72
with responsibility for whatever unlawful prices result. But
that argument would comprehend any buyer who engages in bargaining
over price. If the Commission means buyers who exert undue
pressure, the argument might find greater support in the
legislative background, but less in the language Congress has
employed. Such a reading not only ignores the word "receive," but
opens up even more entangling difficulties with interpretation of
what is undue pressure. [
Footnote 11]
The Commission also urges, from legislative explanation of
similar language in § 2(a), that the word "receive" can in some way
be limited to a continued and systematic receipt of lower prices
that could fairly charge the recipient with knowledge of
illegality. [
Footnote 12]
While we need not decide whether systematic receipt of prices in
itself
Page 346 U. S. 73
could ever be sufficient to give the buyer the requisite
knowledge, [
Footnote 13] we
think, as the argument itself recognizes, that the inquiry must be
into the buyer's knowledge of the illegality.
Not only are the arguments of the Commission unsatisfying, but
we think a fairer reading of the language and of what limited
legislative elucidation we have points toward a reading of § 2(f)
making it unlawful only to induce or receive prices known to be
prohibited discriminations. [
Footnote 14] For § 2(f) was explained in Congress as a
provision under which a seller, by informing the buyer that a
proposed discount was unlawful under the Act, could discourage
undue pressure from the buyer. [
Footnote 15] Of course, such devices for private
enforcement of the Act through fear of prosecution could equally
well have been achieved by providing that the buyer would be liable
if, through the seller or otherwise, he learned that the price he
sought or received was lower than that accorded competitors, but we
are unable, in the light of congressional policy as expressed in
other antitrust legislation, to read this ambiguous language as
putting the buyer at his peril whenever he engages in price
bargaining. Such a reading must be rejected in view of
Page 346 U. S. 74
the effect it might have on that sturdy bargaining between buyer
and seller for which scope was presumably left in the areas of our
economy not otherwise regulated. [
Footnote 16] Although due consideration is to be accorded
to administrative construction where alternative interpretation is
fairly open, it is our duty to reconcile such interpretation,
except where Congress has told us not to, with the broader
antitrust policies that have been laid down by Congress. Even if
the Commission has, by virtue of the Robinson-Patman Act, been
given some authority to develop policies in conflict with those of
the Sherman Act in order to meet the special problems created by
price discrimination, we cannot say that the Commission here has
adequately made manifest reasons for engendering such a conflict so
as to enable to accept its conclusion.
Cf. Eastern-Central
Motor Carriers Assn. v. United States, 321 U.
S. 194,
321 U. S.
211-212.
We therefore conclude that a buyer is not liable under § 2(f) if
the lower prices he induces are either within one of the seller's
defenses, such as the cost justification, or not known by him not
to be within one of those defenses. This conclusion is, of course,
only a necessary preliminary in this case. As we have noted
earlier, the precise issue in the case before us is the burden of
introducing evidence -- a separate issue, though, of course,
related to the substantive prohibition. This issue, involving as it
does some of the same considerations, requires as further to
consider a balance of convenience in the light of whatever
evidentiary rules Congress has laid down for proceedings under the
Act. Assuming, as we have found, that there is no substantive
violation if the buyer did not know that the prices it induced or
received were not cost-justified, we must in this case determine
whether proof that
Page 346 U. S. 75
the buyer knew that the price was lower is sufficient to shift
the burden of introducing evidence to the buyer.
The Commission, in support of its position that it need only
show the buyer's knowledge that the prices were lower, employs
familiar interpretative tools without adequate regard to their
immediate serviceability. It labels a seller's defense, such as the
cost justification, as an "exception to the general prohibition,"
and, from this, argues that, under conventional rules of evidence,
the Commission need come forward with evidence of violation only of
the "general prohibition." This interpretation has foundation in
the many commonsensical readings of comparable prohibitions so as
to put the burden of showing a justification on the one who claims
its benefits. We have said as much even in connection with that
part of § 2(b) of the Robinson-Patman Act which attempts to lay
down the rules of evidence under the Act. [
Footnote 17] That section provides,
"Upon proof being made . . . that there has been discrimination
on price . . . the burden of rebutting
Page 346 U. S. 76
the prima facie case thus made by showing justification shall be
upon the person charged with a violation of this section."
The Commission points out that it was under this section that we
held, in the
Morton Salt case, that the burden of showing
a cost justification is on the seller in a § 2(a) proceeding, and
argues that the same burden is on the buyer. It argues that the
"prima facie case thus made" clearly refers back to "proof [of]
discrimination in price," and thus, from our decision in
Morton
Salt, that the
prima facie case of a prohibited
discrimination to which § 2(b) refers consists only of proof of a
difference in prices in the sale of like goods having the requisite
effect on competition. Saying that § 2(f) differs from § 2(a) "only
in containing the express requirement that the buyer shall have
knowingly' induced or received such price discriminations," the
Commission asks us to hold that a prima facie case under §
2(f), is made out with a showing of the prima facie case
of § 2(a) violation
"plus the additional element of having induced or received such
discrimination with knowledge of the facts which made it violative
of Section 2(a)."
We need not concern ourselves with the Commission's
interpretation of the words "prima facie case thus made" in § 2(b)
and the resulting conclusion that, if § 2(a) and § 2(f) are to be
read as counterparts, the elements necessary for a
prima
facie case under § 2(a) are sufficient for a
prima
facie showing of the "discrimination in price which is
prohibited by this section" in § 2(f). However that may be, the
Commission recognizes that there is an "additional element"
resulting from the word "knowingly" in § 2(f), and, of course, it
is that element about which the controversy here centers, and to
which we must address ourselves. We may, however, note in passing
that consistency between § 2(a) and § 2(f), both as to what
constitutes the prohibited "discrimination in price" and as to the
elements of a
prima facie showing of the
Page 346 U. S. 77
prohibited "discrimination in price," would not be disturbed by
a holding against the Commission in this case, for we are concerned
here with the
prima facie showing of knowledge, admittedly
an independent and separate requirement of § 2(f) above and beyond
that of § 2(a).
The Commission argues that a
prima facie case of
knowledge is made out when it is shown that the buyer knew the
facts making the price differential violative of § 2(a). At another
point, it urges that it must now show only
"that the buyer affirmatively contributed to obtaining the
discriminatory prices by special solicitation, negotiation, or
other action taken by him."
However the argument is phrased, the Commission is, on this
record, insisting that, once knowledge of a price differential is
shown, [
Footnote 18] the
burden of introducing evidence shifts to the buyer. The
Commission's main reliance in this argument is § 2(b), which, as we
have stated above, we interpreted in the
Morton Salt case
as putting the burden of coming forward with evidence of a cost
justification on the seller -- on the one, that is, who claimed the
benefits of the justification.
To this it is answered that, although § 2(b) does speak not of
the seller, but of the "person charged with a violation of this
section," other language in § 2(b) and its proviso seems directed
mainly to sellers, [
Footnote
19] that the legislative chronology of the various provisions
ultimately resulting in the Robinson-Patman Act indicates that §
2(b) was drafted with sellers in mind, and that the few cases so
far decided have dealt only with sellers.
Page 346 U. S. 78
A confident answer cannot be given; some answer must be given.
We think we must read the infelicitous language of § 2(b) as
enacting what we take to be its purpose -- that of making it clear
that ordinary rules of evidence were to apply in Robinson-Patman
Act proceedings. [
Footnote
20] If § 2(b) is to apply to § 2(f) -- although we do not
decide that it does, because we reach the same result without it --
we think it must so be read. Considerations of fairness and
convenience operative in other proceedings must, we think, have
been controlling in the drafting of § 2(b), for it would require
far clearer language than we have here to reach a contrary result.
Cf. Addison v. Holy Hill Fruit Products, 322 U.
S. 607,
322 U. S.
617-618. If that is so, however, decisions striking the
balance of convenience for Commission proceedings against sellers
are beside the point. [
Footnote
21] And we think the fact that the buyer does not have the
required information, and for good reason should not be required to
obtain it, has controlling importance in striking the balance in
this case. This result most nearly accommodates this case to the
reasons that have been given by judges and
Page 346 U. S. 79
legislators for the rule of § 2(b), that is, that the burden of
justifying a price differential ought to be on the one who "has at
his peculiar command the cost and other record data by which to
justify such discriminations." [
Footnote 22] Where, as here, such considerations are
inapplicable, we think we must disregard whatever contrary
indications may be drawn from a merely literal reading of the
language Congress has used. It would not give fair effect to § 2(b)
to say that the burden of coming forward with evidence as to costs
[
Footnote 23] and the
buyer's knowledge thereof shifts to the buyer as soon as it is
shown that the buyer knew the prices differed. Certainly the
Commission, with its broad power of investigation and subpoena
prior to the filing of a complaint, is on a better footing to
obtain this information than the buyer. Indeed, though it is, of
course, not for us to enter the domain of the Commission's
discretion in such matters, the Commission may in many instances
find it not inconvenient to join the offending seller in the
proceedings.
If the requirement of knowledge in § 2(f) has any significant
function, it is to indicate that the buyer whom Congress in the
main sought to reach was the one who, knowing full well that there
was little likelihood of a defense for the seller, nevertheless
proceeded to exert pressure for lower prices. Enforcement of the
provisions of § 2(f) against such a buyer should not be difficult.
Proof of a cost justification being what it is, too often, no one
can ascertain whether a price is cost-justified. But trade
experience
Page 346 U. S. 80
in a particular situation can afford a sufficient degree of
knowledge to provide a basis for prosecution. By way of example, a
buyer who knows that he buys in the same quantities as his
competitor and is served by the seller in the same manner or with
the same amount of exertion as the other buyer can fairly be
charged with notice that a substantial price differential cannot be
justified. The Commission need only to show, to establish its
prima facie case, that the buyer knew that the methods by
which he was served and quantities in which he purchased were the
same as in the case of his competitor. If the methods or quantities
differ, the Commission must only show that such differences could
not give rise to sufficient savings in the cost of manufacture,
sale, or delivery to justify the price differential, and that the
buyer, knowing these were the only differences, should have known
that they could not give rise to sufficient cost savings. The
showing of knowledge, of course, will depend to some extent on the
size of the discrepancy between cost differential and price
differential, so that the two questions are not isolated. A showing
that the cost differences are very small compared with the price
differential, and could not reasonably have been thought to justify
the price difference, should be sufficient.
What other circumstances can be shown to indicate knowledge on
the buyer's part that the prices cannot be justified we need not
now attempt to illustrate, [
Footnote 24] but
Page 346 U. S. 81
surely it will not be an undue administrative burden to explain
why other proof may be sufficient to justify shifting the burden of
introducing evidence that the buyer is or is not an unsuspecting
recipient of prohibited discriminations. We think, in any event, it
is for the Commission to spell out the need for imposition of such
a harsh burden of introducing evidence as it appears to have sought
in this case. Certainly we should have a more solid basis than an
unexplained conclusion before we sanction a rule of evidence that
contradicts antitrust policy and the ordinary requirements of
fairness. While this Court ought scrupulously to abstain from
requiring of the Commission particularization in its findings so
exacting as to make this Court, in effect, a court of review on the
facts, it is no less important, since we are charged with the duty
of reviewing the correctness of the standards which the Commission
applies and the essential fairness of the mode by which it reaches
its conclusions, that the Commission do not shelter behind
uncritical generalities or such looseness of expression as to make
it essentially impossible for us to determine what really lay
behind the conclusions which we are to review.
Cf. United
States v. Chicago, M., St. P. & P. R. Co., 294 U.
S. 499,
294 U. S.
510-511.
Because of our view of the balance of convenience in these
circumstances, we do not reach petitioner's claim that the
Commission is, in effect, saying that knowledge of a difference in
prices creates a presumption of knowledge that the price was
unlawful, a presumption it claims would fall for lack of rational
connection under
Tot v. United States, 319 U.
S. 463.
Cf. Note, E[dmund]
Page 346 U. S. 82
M. M[organ], 56 Harv.L.Rev. 1324. It has seemed to us
unnecessary in this case to speak of presumptions, and we need only
call attention to the fact that in this case, as in the
Tot case, we have dealt only with the burden of
introducing evidence, and not with the burden of persuasion, as to
which different considerations may apply.
The judgment of the Court of Appeals accordingly is reversed as
to the charges in Count II of the complaint (Count I is not before
us), and the case is remanded to that court with instructions to
remand it to the Federal Trade Commission for such further action
as is open under this opinion.
It is so ordered.
[
Footnote 1]
The Court also granted enforcement of the order on a
cross-petition by the Commission. The Commission concedes the
impropriety of this action under our decision in
Federal Trade
Commission v. Ruberoid Co., 343 U. S. 470,
rendered after the decision of the Court of Appeals in the case now
before us. In view of this concession, we assume that the Court of
Appeals, on the remand of this case, will, without further
direction, reconsider its order for enforcement.
[
Footnote 2]
The two prohibitions are as follows:
"SEC. 2. (a) That it shall be unlawful for any person engaged in
commerce, in the course of such commence, either directly or
indirectly, to discriminate in price between different purchasers
of commodities of like grade and quality, where either or any of
the purchases involved in such discrimination are in commerce,
where such commodities are sold for use, consumption, or resale
within the United States or any Territory thereof or the District
of Columbia or any insular possession or other place under the
jurisdiction of the United States, and 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. . . ."
"[The other provisos of § 2(a), not relevant here, concern the
grant of authority to the Commission to establish quantity limits,
recognition of the seller's right to select his customers under
certain conditions, and exemption of price changes made in response
to changing market conditions.]"
"
* * * *"
"(f) That it shall be unlawful for any person engaged in
commerce, in the course of such commerce, knowingly to induce or
receive a discrimination in price which is prohibited by this
section."
[
Footnote 3]
The Commission recognized the need, common in antitrust
litigation, for care on the part of the prosecuting officers not to
overburden the record.
"The record in this case does not disclose the reason for such a
plethora of cumulative evidence as was adduced by Government
counsel in the instant matter. Neither harassment of litigants nor
the waste of Government funds in needless reiteration through
cumulative evidence should be countenanced, nor does it seem that
it was necessary to name 14 sellers as typical of a group from
which respondents had induced or received discriminations in price,
and certainly the records of not more than 5 of such sellers would
have supplied ample evidence of such discriminations or price
differentials."
In re Automatic Canteen Co. of America, 46 F.T.C. 861,
892. Failure to limit the evidence in some such way to typical
transactions would create an especially heavy burden in a
proceeding against a buyer under § 2(f) such as that here, where
discriminatory sales were alleged to have been made by about 80 of
the buyer's 115 suppliers.
[
Footnote 4]
Although the Commission recited such instances, it did not
relate them to what the buyer should have known as to costs. It did
not find from such instances that the circumstances should have
provoked inquiry in the mind of a prudent business man. In short,
we do not have a case in which the Commission, in its informed
judgment, was led to conclude that, in the circumstances, knowing
acceptance or inducement of a preference justified an inference of
knowledge as to costs.
[
Footnote 5]
For a collection of relevant authorities and secondary material
available on cost showings under the Act,
see Note, 65
Harv.L.Rev. 1011.
See also Fuchs, The Requirement of
Exactness in the Justification of Price and Service Differentials
under the Robinson-Patman Act, 30 Tex.L.Rev. 1; Haslett, Price
Discriminations and their Justifications under the Robinson-Patman
Act of 1939, 46 Mich.L.Rev. 450, 472; Sawyer, Accounting and
Statistical Proof in Price Discrimination Cases, 36 Iowa L.Rev.
244. For discussion of specific cost cases under the Act,
see Aronson, Defendants under the Robinson-Patman Act, in
Business and the Robinson-Patman Law (Werne ed.), 212, 227;
Taggart, The Cost Principle in Minimum Price Regulation, 110, 8
Mich.Bus.Studies 151, 260 (1938); Warmack, Cost Accounting Problems
under the Robinson-Patman Act, CCH Robinson-Patman Act Symposium
(1947) 105; Comment, 35 Ill.L.Rev. 60.
[
Footnote 6]
Federal Trade Commission rulings in some cost cases
"demonstrate that expert testimony and other evidence extrinsic
to an actual cost analysis will be given little weight by the
Commission. The FTC apparently believes that such materials lack
the objectivity and relevance of the approved method of
analysis."
Note, 65 Harv.L.Rev. 1011, 1013-1014. 1014.
See also
Warmack,
supra, note 5
Compare In re Minneapolis-Honeywell Regulator Co., 44
F.T.C. 351, 394, a case in which "an extensive cost study"
resulting from "sincere and extensive efforts" was in part
accepted.
[
Footnote 7]
See, e.g., Warmack,
supra, note 5 at 107 110.
[
Footnote 8]
Cf. Longman, Distribution Cost Analysis 250, and
articles cited
supra, note
5
[
Footnote 9]
See, e.g., 80 Cong.Rec. 6428, 9419; H.R.Rep.No. 2951,
74th Cong., 2d Sess. 8.
[
Footnote 10]
Were that the case, it might strictly be argued that the
seller's "defenses" are not relevant in a § 2(f) proceeding and
that what is prohibited is the knowing inducement or receipt of a
price lower than that accorded competing buyers. Such an
interpretation has ambiguous legislative support. Congressman
Utterback, in submitting the conference report to the House,
stated,
". . . a discrimination is more than a mere difference.
Underlying the meaning of the word is the idea that some
relationship exists between the parties to the discrimination which
entitles them to equal treatment, whereby the difference granted to
one casts some burden or disadvantage upon the other."
80 Cong.Rec. 9416. Plainly enough, under this statement, a
discrimination in price may mean either a price differential in
sales to two competitors, or a price differential in sales to two
competitors which, because of an absence of cost or other
justification, puts the unfavored competitor at a disadvantage.
Compare Haslett,
supra, note 5 at 453-466,
with McAllister, Price
Control by Law in the United States, 4 Law & Contemp.Prob. 273,
291. In any event, controversy over the meaning of the isolated
phrase "discrimination in price" is beside the point here.
[
Footnote 11]
Time and again there was recognition in Congress of a freedom to
adopt and pass on to buyers the benefits of more economical
processes,
see, e.g., H.R.Rep.No. 2287, 74th Cong., 2d
Sess. 10, 17; 80 Cong.Rec. 9415, 9417; buyer pressure to obtain the
benefits of such savings could certainly not be undue pressure.
Cf. Edwards, Maintaining Competition, 161. The
Commission's findings do not suggest such a discrepancy in
bargaining position between this buyer and his suppliers as to
warrant characterizing the buyer as "bludgeoning." The Commission
did find that those on whom the greatest "pressure" was exerted
were such not inconsiderable candy manufacturers as the Curtiss
Candy Co. and W. F. Schrafft & Sons Corp.
[
Footnote 12]
See H.R.Rep.No. 2951, 74th Cong., 2d Sess. 5-6,
explaining the language in § 2(a) quoted
supra, note 2 "or prevent competition with any
person who either grants or knowingly receives the benefit of such
discrimination," as follows: the purpose of the addition of the
word "knowingly"
"is to exempt from the meaning of the surrounding clause those
who incidentally receive discriminatory prices in the routine
course of business, without special solicitation, negotiation, or
other arrangement for them on the part of the buyer or seller, and
who are therefore not justly chargeable with knowledge that they
are receiving the benefit of such discrimination."
The context in which this explanation was given, as well as the
precise language, so differs from § 2(f) that this interpretation
does not present a contradiction between it and our reading of §
2(f).
[
Footnote 13]
See pp.
346 U. S. 80-81,
post.
[
Footnote 14]
We, of course, do not, in so reading § 2(f), purport to pass on
the question whether a "discrimination in price" includes the
prohibitions in such other sections of the Act as §§ 2(d) and
2(e).
[
Footnote 15]
Congressman Utterback, in presenting the conference report to
the House, spoke quite clearly in terms indicating that the
provisions of § 2(f) contemplated only the buyer who knew that the
price was not justified by costs. Section 2(f)
"makes it easier [for the manufacturer] to resist the demand for
sacrificial price cuts coming from mass-buyer customers, since it
enables him to charge them with knowledge of the illegality of the
discount, and equal liability for it, by informing them that it is
in excess of any differential which his difference in cost would
justify as compared with his other customers."
80 Cong.Rec. 9419.
[
Footnote 16]
Cf. Adelman, Effective Competition and the Antitrust
Laws, 61 Harv.L.Rev. 1289, 1331; Edwards, Maintaining Competition,
161.
[
Footnote 17]
Federal Trade Commission v. Morton Salt Co.,
334 U. S. 37,
334 U. S. 44-45.
Cf. S.Rep.No. 1502, 74th Cong., 2d Sess. 3. Section 2(b),
in its entirety, reads as follows:
"(b) Upon proof being made at any hearing on a complaint under
this section that there has been discrimination in price or
services or facilities furnished, 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 or the furnishing of services or
facilities to any purchaser or purchasers was made in good faith to
meet an equally low price of a competitor, or the services or
facilities furnished by a competitor."
Throughout this opinion, a reference to § 2(b) is to the
procedural language preceding the proviso; the language of the
proviso, which we construed in
Standard Oil Co. v. Federal
Trade Comm'n, 340 U. S. 231, is
referred to only when we speak of the "proviso of § 2(b)".
[
Footnote 18]
In this connection,
see supra, note 4 and
post, note 24
[
Footnote 19]
For example, the language of the proviso of § 2(b) concerning
price differentials made to meet competition refers only to "a
seller"; further, the authority given the Commission under § 2(b)
when justification is not shown is "to issue an order terminating
the discrimination," an order that could not usefully be directed
to buyers.
But cf. 80 Cong.Rec. 9418.
[
Footnote 20]
Congressman Patman, describing the § 2(b) rule as to the burden
of proof, said:
"It means exactly the rule of law today. It is a restatement of
existing law. So far as I am concerned, you can strike it out. It
makes no difference. It is the law of this land exactly as it is
written there."
80 Cong.Rec. 8231.
[
Footnote 21]
It does not aid understanding to suggest that § 2(f) has the
same significance, as to a knowing buyer, as other sections of the
Act have as to a knowing seller. A buyer knowing he is receiving a
lower price cannot be said to be in the same position as a seller
granting a lower price. The language of the statute bars such a
construction. Even if the buyer has the "same" burden as the
seller, the fact that a seller has the burden to show his costs
does not automatically, by virtue of § 2(f), become a buyer's
burden to show the seller's cost. Nor has
Federal Trade
Commission v. A. E. Staley Mfg. Co., 324 U.
S. 746,
324 U. S.
759-760, any helpful relation to the problem of this
case, if for no other reason than that that case did not call for a
detailed consideration of the procedural portions of § 2(b).
[
Footnote 22]
80 Cong.Rec. 3599.
Samuel H. Moss, Inc. v. Federal Trade
Commission, 148 F.2d 378, 379; 80 Cong.Rec. 8241.
[
Footnote 23]
Our view that § 2(b) permits consideration of conventional rules
of fairness and convenience, of course, requires application of
those rules to the particular evidence in question. Evidence, for
example, that the seller's price was made to meet a competing
seller's offer to a buyer charged under § 2(f) might be available
to a buyer more readily even than to a seller.
[
Footnote 24]
We need not in this case consider the weight that can be
attached to affirmative statements by the seller to the buyer that
a price was or was not cost-justified, since there were no such
statements in this case.
See supra, p.
346 U. S. 67. We
need not now consider whether, in an appropriate case, the
Commission may find it necessary to subject such statements to
careful scrutiny. Thus, for instance, the Commission may consider
that a seller stating that a price would be unlawful might, in some
situations, be puffing, rather than stating anything which a buyer
can rely on or should be charged with. On the other hand, the
Commission may, in some circumstances, wish to refuse to accept a
buyer's claim that he relied on an affidavit or other assurance
from the seller that price differentials were cost-justified; the
furnishing of such an assurance might, together with other
circumstances, indicate a sufficient absence of arm's-length
bargaining to raise serious doubts as to the weight the assurance
should be given in support of a buyer's claim.
MR. JUSTICE DOUGLAS, with whom MR. JUSTICE BLACK and MR. JUSTICE
REED concur, dissenting.
This decision is a graphic illustration of the way in which a
statute can read with enervating effect.
Section 2(b) of the Clayton Act, 38 Stat. 730, as amended by the
Robinson-Patman Act, 49 Stat. 1526, 15 U.S.C. § 13(b), provides
that, where proof is made that there has been
"discrimination in price or services or facilities furnished,
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. . . ."
(Italics added.)
Section 2(f) makes it unlawful "
for any person" engaged
in commerce "knowingly to induce or receive a discrimination in
price which is prohibited by this section." (Italics added.)
The words "the person charged," as used in § 2(b), and the words
"any person," used in § 2(f), plainly include buyers, as well as
sellers.
Page 346 U. S. 83
The nature of the discrimination condemned is made clear in §
2(a). It outlaws discrimination "in price between different
purchasers of commodities of like grade and quality" where the
effect is substantially to prevent or lessen competition or tend to
create a monopoly as respects any person "who either grants or
knowingly receives the benefit of such discrimination." But it
permits price 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 the commodities are sold or delivered.
In the present case, the Court determines that, even though a
"buyer knew that the price was lower," such knowledge is
insufficient to "shift the burden of introducing evidence to the
buyer." But § 2(b) requires the person shown to practice a
discrimination to establish a justification. Section 2(f) was
intended to make clear that the same bans and burdens are on a
knowing buyer obtaining discriminatory prices, as we held in
Federal Trade Commission v. A. E. Staley Mfg. Co.,
324 U. S. 746,
324 U. S.
759-760, approved in
Standard Oil Co. v. Federal
Trade Commission, 340 U. S. 231, are
on a knowing seller who grants them.
The record shows persistent and continuous efforts of this large
buyer in wheedling and coercing suppliers into granting it
discriminatory prices. The Commission summarized petitioner's
activities in far more sedate terms than their bizarre nature
justified:
"Respondent used various methods to induce its suppliers to
grant discriminatory prices. One of these was to inform prospective
suppliers of the prices and terms of sale which would be acceptable
to the respondent without consideration or inquiry as to whether
such supplier could justify such a price on a cost basis or whether
it was being offered to other
Page 346 U. S. 84
customers of the supplier. At other times, the respondent
refused to buy unless the price to it was reduced below prices at
which the particular supplier sold the same merchandise to others.
In other instances, respondent sought to explain to the prospective
supplier that certain alleged savings would accrue to the supplier
in selling to respondent, or that certain elements of the
supplier's cost could be eliminated, which would, in respondent's
opinion, justify a lower price. In carrying out this form of
inducement, respondent would advise a supplier or prospective
supplier of the price which it considered 'standard price.' In
letters written to the Curtiss Candy Company on November 15, 1939,
and to W. F. Schrafft & Sons Corporation on February 15, 1937,
respondent summarized alleged savings to these companies as
follows:"
bwm:
Curtiss Schrafft
Alleged Savings Co. Corp.
-------------------------------------- ------- ---------
(1) Freight savings of 6% 5% to 7%
(2) Sales cost savings of 7% 7%
(3) 24-count cartons savings of 5% 5%
(4) Return and allowances savings of 1% 1% to 2%
(5) Free deals and samples savings of 8% 2% to X%
(6) Shipping containers savings of .... 1% to 2%
---- ----------
Total deductions 27% 21% to 25%
ewm:
"Respondent advised these companies that such alleged savings
could be made because of the method by which respondent made
purchases and because certain services could be eliminated in
selling of it."
There is no doubt that the large buyers wield clubs that give
them powerful advantages over the small merchants. Often, large
merchants gain advantages over other sellers of the same
merchandise by obtaining price concessions by pressure on their
suppliers. The evil was
Page 346 U. S. 85
acknowledged in
Federal Trade Commission v. Morton Salt
Co., 334 U. S. 37,
334 U. S. 43.
The Congress plainly endeavored to curb the buyer in the kind of
activities disclosed by this record. As the House Report reveals,
the line sought to be drawn was between those who incidentally
receive discriminatory prices and those who actively solicit and
negotiate them. H.R.Rep. No. 2951, 74th Cong., 2d Sess., pp.
5-6.
The Court disregards this history. The Court's construction not
only requires the Commission to show that the price discriminations
were not justified; it also makes the Commission prove what lay in
the buyer's mind. I would let the acts of the buyer speak for
themselves. Where, as here, the buyer undertakes to bludgeon
sellers into prices that give him a competitive advantage, there is
no unfairness in making him show that the privileges he demanded
had cost justifications. This buyer over and again held itself out
as a cost expert.
* I would hold it
to its professions. Since it was the coercive influence, there is
no unfairness in making it go forward with evidence to rebut the
Commission's
prima facie case.
* A reading of the record leaves no doubt that petitioner knew
in numerous instances that it was squeezing a price from the seller
which was less than the seller's costs.