Holding that § 2(b) of the Clayton Act, as amended by the
Robinson-Patman Act, 15 U.S.C. § 13(b), affords a seller a complete
defense to a charge of price discrimination if its lower price was
"made in good faith to meet a lawful and equally low price of a
competitor," this Court remanded this case to the Federal Trade
Commission for findings as to whether respondent so acted in
selling gasoline to four comparatively large "jobber" customers in
Detroit at a lower price than it sold like gasoline to many
comparatively small service station customers in the same area.
Subsequently, without denying that respondent's lower prices were
made to meet the equally low prices of its competitors, the
Commission found that respondent's lower prices were made pursuant
to a price system, rather than being "the result of departures from
a nondiscriminatory price scale," and, therefore, were not made "in
good faith," and it again ordered respondent to cease and desist
from this practice. The Court of Appeals set aside the order on the
ground that such a finding was not supported by the record.
Held: the case turns on a factual issue, decided by the
Court of Appeals upon a fair assessment of the record, and its
judgment is affirmed. Pp.
355 U. S.
397-404.
(a) Whether, on the record as a whole, there is substantial
evidence to support agency findings is a question which Congress
has placed in the keeping of the Court of Appeals, and this Court
will intervene only when the standard appears to have been
misapprehended or grossly misapplied.
Universal Camera Corp. v.
Labor Board, 340 U. S. 474. Pp.
355 U. S.
400-401.
(b) In determining that respondent's prices to these "jobbers"
were reduced as a response to individual competitive situations,
rather than pursuant to a pricing system, which is solely a
question of fact, the Court of Appeals made a "fair assessment" of
the record in this case. Pp.
355
U.S. 401-404.
233 F.2d 649 affirmed.
Page 355 U. S. 397
MR. JUSTICE CLARK delivered the opinion of the Court.
This case is a sequel to
Standard Oil Co. v. Federal Trade
Comm'n, 340 U. S. 231
(1951), wherein the Court held that § 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), afforded a seller a complete defense to a charge of
price discrimination if its lower price was "made in good faith to
meet a lawful and equally low price of a competitor." 340 U.S. at
246. We remanded the case with instructions that the Federal Trade
Commission make findings on Standard's contention that its
discriminatory prices were so made. The subsequent findings are not
altogether clear. The Commission, acting on the same record,
seemingly does not contest the fact that Standard's deductions were
made to meet the equally low prices of its competitors. However,
Standard was held not to have acted in good faith, and the § 2(b)
defense precluded, because of the Commission's determination
Page 355 U. S. 398
that Standard's reduced prices were made pursuant to a price
system, rather than being "the result of departures from a
nondiscriminatory price scale." 49 F.T.C. 923, 954. The Court of
Appeals found no basis in the record for such a finding, and
vacated the order of the Commission, holding that Standard's
"
good faith' defense was firmly established." 233 F.2d 649,
655. In view of our former opinion and the importance of bringing
an end to this protracted litigation, we granted certiorari. 352
U.S. 950 (1956). Having concluded that the case turns on a factual
issue, decided by the Court of Appeals upon a fair assessment of
the record, we affirm the decision below.
The long history of this 17-year-old case may be found both in
the original opinion of the Court of Appeals, 173 F.2d 210, and in
the original opinion of this Court,
supra. The case arose
as a companion to similar complaints filed by the Commission
against Gulf Oil Company, the Texas Company, and Shell Oil Company.
In its petition for certiorari, the Commission stresses the
existence of an industry-wide "dual price system," asserting that
the decision below would "insulate from attack a price pattern
deeply entrenched in the industry -- not only in the Detroit area,
but also elsewhere in the country." The pendency of the Gulf,
Texas, and Shell complaints is mentioned twice, and the Commission
states in a footnote that "[p]roceedings thereon have been deferred
until the disposition of this case." However, on April 3, 1957, the
Commission decided that "it will not now be practicable to try the
issues raised" in the companion complaints "irrespective of the
final outcome of . . . the matter of Standard Oil Company," and
dismissed all three of the companion cases. The claim that the
asserted dual pricing system was of industry-wide scope is not
vital to the Commission's position here, was not alleged in its
complaint, and is not
Page 355 U. S. 399
included among its findings; [
Footnote 1] therefore, we limit our consideration of the
pricing system contention to Standard alone.
The Commission urges us to examine its 8-volume record of over
5,500 pages and determine if its finding that Standard reduced
prices to four "jobbers" [
Footnote
2] pursuant to a pricing system was erroneous, as held by the
Court of Appeals. [
Footnote 3]
The Commission contends that a § 2(b) defense is precluded if the
reductions were so made. If wrong in this, it maintains that the
"good faith" element of a § 2(b) defense is not made out by showing
that competitors employ such a pricing system, [
Footnote 4] and, in any
Page 355 U. S. 400
event, is negatived by Standard's failure to make a
bona
fide effort to review its pricing system upon passage of the
Robinson-Patman Act. [
Footnote
5]
On the present posture of the case, we believe that further
review of the evidence is unwarranted. As stated in
Federal
Trade Comm'n v. American Tobacco Co., 274 U.
S. 543,
274 U. S. 544
(1927), although
"[t]he statement of the petition for certiorari that the
judgment and opinion below might seriously hinder future
administration of the law was grave and sufficiently probable to
justify issuance of the writ,"
it now appears that "[p]roper decision of the controversy
depends upon a question of fact," and therefore
"we adhere to the usual rule of noninterference where
conclusions of Circuit Courts of Appeals depend on appreciation of
circumstances which admit of different interpretations."
Moreover, in
Universal Camera
Corp.
Page 355 U. S. 401
v. Labor Board, 340 U. S. 474,
340 U. S. 491
(1951), we decided that substantiality of evidence on the record as
a whole to support agency findings
"is a question which Congress has placed in the keeping of the
Courts of Appeals. This Court will intervene only in what ought to
be the rare instance when the standard appears to have been
misapprehended or grossly misapplied."
We do no more on the issue of insubstantiality than decide that
the Court of Appeals has made a "fair assessment" of the record.
[
Footnote 6] That conclusion is
strengthened by the fact that the finding made by the Court of
Appeals accords with that of the trial examiner, two dissenting
members of the Commission, and another panel of the Court of
Appeals when the case was first before that court in 1949, all of
them being agreed that the prices were reduced in good faith to
meet offers of competitors.
Both parties acknowledge that discrimination pursuant to a price
system would preclude a finding of "good faith."
Federal Trade
Comm'n v. A. E. Staley Mfg. Co., 324 U.
S. 746 (1945);
Federal Trade Comm'n v. Cement
Institute, 333 U. S. 683
(1948);
Federal Trade Comm'n v. National Lead Co.,
352 U. S. 419
(1957). The sole question then is one of fact: were Standard's
reduced prices to four "jobber" buyers -- Citrin-Kolb, Stikeman,
Wayne, and Ned's -- made pursuant to a pricing system, rather than
to meet individual competitive situations?
Page 355 U. S. 402
We have examined the findings of the Commission, which relies
most heavily on the fact that no competitors' offers were shown to
have been made to Citrin-Kolb, Stikeman, or Wayne prior to the time
Standard initially granted them the reduced tank-car price.
[
Footnote 7] All three of these
"jobbers," however, were granted the tank-car price before the
passage of the Robinson-Patman Act in 1936, and the trial examiner
excluded proof of pre-1936 offers on the ground of irrelevancy. The
Commission approved this ruling, and, on remand, failed to reopen
the record to take any further proof. In our former opinion in this
case, we said,
"There is no doubt that, under the Clayton Act, before its
amendment by the Robinson-Patman Act, [such] evidence would have
been material, and, if accepted, would have established a complete
defense to the charge of unlawful discrimination."
340 U.S. at
340 U. S.
239-240. The proof should have been admitted; its
absence can hardly be relied on by the Commission now as a ground
for reversal. In any event, the findings that were made are
sufficient for our disposition of the case.
It appears to us that the crucial inquiry is not why reduced
prices were first granted to Citrin-Kolb, Stikeman, and Wayne, but,
rather, why the reduced price was continued subsequent to passage
of the Act in 1936. The findings show that both major and local
suppliers made numerous attempts in the 1936-1941 period to lure
these "jobbers" away from Standard with cut-rate prices,
oftentimes
Page 355 U. S. 403
much lower than the one and one-half cent reduction Standard was
giving them. [
Footnote 8] It is
uncontradicted, as pointed out in one of the Commission dissents,
that Standard lost three of its seven "jobbers" by not meeting
competitors' pirating offers in 1933-1934. All of this occurred in
the context of a major gasoline price war in the Detroit area,
created by an extreme overabundance of supply -- a setting most
unlikely to lend itself to general pricing policies. The Commission
itself stated:
"It may well be that [Standard] was convinced that, if it ceased
granting tank-car prices to Citrin-Kolb, Wayne, and Stikeman and
continued to refuse the tank-car price to Ned's Auto Supply
Company, it would lose these accounts. It had substantial reasons
for believing this to be the case, for all of these concerns,
except Ned's Auto Supply Company, had already been recognized as
entitled to the tank-car price under the commonly accepted
standards of the industry, and Ned's had achieved a volume of
distribution which brought it within the range where it was likely
to be so recognized by a major oil company at any time."
49 F.T.C. at 952-953.
The findings as to Ned's, the only one of the "jobbers"
initially to receive the tank-car price
post
Robinson-Patman, are highly significant. After a prolonged period
of haggling, during which Ned's pressured Standard with information
as to numerous more attractive price offers made by other
suppliers, Standard responded to an ultimatum from Ned's in 1936
with a half-cent per gallon reduction from the tank-wagon price.
The
Page 355 U. S. 404
Commission concedes that this first reduction occurred at a time
when Ned's did not meet the criteria normally insisted upon by
Standard before giving any reduction. Two years later, after a
still further period of haggling [
Footnote 9] and another Ned's ultimatum, Standard gave a
second reduction of still another cent.
In determining that Standard's prices to these four "jobbers"
were reduced as a response to individual competitive situations,
rather than pursuant to a pricing system, the Court of Appeals
considered the factors just mentioned, all of which weigh heavily
against the Commission's position. The Commission's own findings
thus afford ample witness that a "fair assessment" of the record
has been made. Standard's use here of two prices, the lower of
which could be obtained under the spur of threats to switch to
pirating competitors, is a competitive deterrent far short of the
discriminatory pricing of
Staley, Cement, and
National
Lead, supra, and one which we believe within the sanction of §
2(b) of the Robinson-Patman Act.
Affirmed.
[
Footnote 1]
The Commission admits that not all of the major suppliers were
using the asserted dual price system, stating in its brief that
Standard's two largest competitors in the Detroit area,
Socony-Vacuum and Sun Oil Company, sold only at the higher
tank-wagon price. The Commission findings reveal that those
suppliers who did offer a tank-car price to the Standard customers
in question were not offering a uniform price: both Shell and the
Texas Company, for example, made offers of two cents per gallon off
the tank-wagon price, as contrasted with Standard's one and
one-half cent reduction.
[
Footnote 2]
The particular tag "jobbers" is of no significance here in the
light of our affirmance of the Court of Appeals' conclusion that
the reductions in price complained of were not made pursuant to a
pricing system. Standard's use of the word, while not an accurate
description of the economic function performed by the four
purchasers, is as consistent with a desire to placate customers to
whom Standard was not forced by lower offers to give a reduced
price as it would be with any asserted reduction of prices pursuant
to a pricing system.
[
Footnote 3]
". . . [W]e are unable to discern any basis for the conclusion
that petitioner's prices 'were not the result of departures from a
nondiscriminatory price scale.'
The record affirmatively
demonstrates to the contrary. Petitioner sold invariably at
its uniform tank-wagon price, except when at different times it
reduced its price to meet competitive offers in order to retain a
customer."
Standard Oil Co. v. Federal Trade Comm'n, 233 F.2d 649,
654. (Emphasis added.)
[
Footnote 4]
This contention falls of its own weight, for the conclusion that
the reductions here were not made pursuant to a pricing system
negates the fact assumption underlying the Commission's argument
that there is no good faith when one price system is being matched
against another. There is no showing or serious contention by the
Commission that the offers of Standard's competitors were unlawful.
Indeed, the Court of Appeals stated,
"[I]n the instant situation, there is no finding, no contention,
and not even a suspicion, but that the competing prices which
petitioner met were lawful."
233 F.2d at 654. The Commission admits that it "did not actually
adjudicate the legality of the competing prices which Standard
allegedly met. . . ." In the manner of a casual aside, the
Commission belatedly suggests now that the competitors' prices were
unlawful, since they were similar to Standard's reductions, and the
latter were unlawful because made pursuant to a pricing system. If
this be thought sufficient to raise the question, the foundation of
the Commission's logic is destroyed by our affirmance of the
finding that Standard's reductions were not made pursuant to any
price system.
[
Footnote 5]
Our disposition eliminates the necessity of considering this
last point. Nor need we consider the Commission's claim that the
Court of Appeals held the question involved here to be one of law.
An examination of the court's statement, 233 F.2d at 651, indicates
it had reference to the broader issue of Standard's "good faith"
under § 2(b).
[
Footnote 6]
Labor Board v. Pittsburgh S.S. Co., 340 U.
S. 498,
340 U. S.
502-503 (1951);
see also Labor Board v. American
National Ins. Co., 343 U. S. 395,
343 U. S.
409-410 (1952). Those cases cannot be distinguished from
the present one on the basis of the statutes involved.
Compare National Labor Relations Act, § 10(e), 61 Stat.
147, 29 U.S.C. § 160(e),
with Federal Trade Commission
Act, § 5(c) and (d), 52 Stat. 112-113, 15 U.S.C. § 45(c)(d). In
Universal Camera, supra, the Court indicated that the
review standard established in that case would apply to all
instances of court review of agency decisions. 340 U.S. at
340 U. S.
488-490.
[
Footnote 7]
The Commission brief also claims that reduction pursuant to a
pricing system was admitted in the 1940 answer filed by Standard.
That portion of the answer referred to, however, was concerned with
establishing an alternative and altogether different defense,
namely, cost justification on the basis of functional customer
classification. Such defense could be argued even if the reductions
were held made pursuant to a pricing method, and therefore is
consistent with the claim of good faith meeting of competition.
[
Footnote 8]
The Commission places great importance on the fact that only one
of these offers was a standing offer. This is not a situation
involving only one or two competitive raids, however; continuation
of reductions once granted is warranted by § 2(b) when competitors'
reduced price offers are recurring again and again in a cutthroat
market.
[
Footnote 9]
the findings indicate that similar haggling over an extended
period of time occurred before each of the other "jobbers" obtained
a reduced price. The great time consumed in the haggling process
tends to negate any idea that the participants were only deciding
whether a given purchaser met Standard's four well-defined "jobber"
criteria -- annual volume of one to two million gallons, own
delivery facilities, bulk storage capable of taking tank-car
delivery, and responsible credit rating.
MR. JUSTICE DOUGLAS, with whom THE CHIEF JUSTICE, MR. JUSTICE
BLACK and MR. JUSTICE BRENNAN concur, dissenting.
The Court today cripples the enforcement of the Robinson-Patman
Act, 49 Stat. 1526, 15 U.S.C. § 13, in an
Page 355 U. S. 405
important area. Section 2 of the Act makes it unlawful for any
person engaged in commerce "to discriminate in price between
different purchasers of commodities of like grade and quality"
where the purchases are in commerce. Section 2 further provides
that, as proof of a discrimination "the burden of rebutting the
prima facie case" shall be on the person charged with 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."
(Italics added.)
First. Standard admitted that it gave reduced prices to
some retailers and refused those reduced prices to other retailers.
Before granting these retailers the reduced prices, Standard
classified them as "jobbers." Standard's definition of a "jobber"
took into account the volume of sales of the "jobber," his bulk
storage facilities, his delivery equipment, and his credit rating.
If Standard's tests were met, the "retailer" became a "jobber" even
though he continued to sell at retail. Moreover, Standard's test of
who was a "jobber" did not take into account the cost to Standard
of making these sales. So Standard's definition of "jobber" was
arbitrary, both as respects the matter of costs and the matter of
function. It comes down to this: a big retailer gets one price; a
small retailer gets another price. And this occurs at the
ipse
dixit of Standard, not because the cost of serving the big
retailer is less, nor because the big retailer, as respects the
sales in question, performs a function different from any other
retailer.
The construction now given the Act flies in the face of the
policy expressed by the provisions already quoted and
Page 355 U. S. 406
the words in explanation used by Representative Patman
himself:
"What are the objectives of this bill? Mr. Chairman, there has
grown up in this country a policy in business that a few rich,
powerful organizations, by reason of their size and their ability
to coerce and intimidate manufacturers, have forced those
manufacturers to give them their goods at a lower price than they
give to the independent merchants under the same and similar
circumstance and for the same quantities of goods. It that right or
wrong? It is wrong. We are attempting to stop it, recognizing the
right of the manufacturer to have a different price for a different
quantity where there is a difference in the cost of
manufacture."
80 Cong.Rec. 8111.
Second. It is argued, however, that the discrimination
in favor of the big retailers and against the small ones is
justified on the ground that Standard did no more than meet
competition.
To repeat, Standard has given lower prices to some retailers
than to others by labeling the favored retailers as "jobbers," when
in fact they are not "jobbers." It seems impossible to justify the
statutory burden of showing "good faith" by reliance upon such a
plainly deceptive contrivance as that.
The Court concedes that Standard did not meet the burden of
proving its good faith if its discriminatory prices were made
pursuant to a pricing "system" within the meaning given that term
by
Federal Trade Comm'n v. A. E. Staley Mfg. Co.,
324 U. S. 746;
Federal Trade Comm'n v. Cement Institute, 333 U.
S. 683;
Federal Trade Comm'n v. National Lead
Co., 352 U. S. 419. The
Commission found
"the discriminations in price involved in this proceeding were
made pursuant to respondent's established
Page 355 U. S. 407
method of pricing."
The record amply supports this finding. [
Footnote 2/1]
If a seller offers a reduced price for no other reason than to
meet the lawful low price of a competitor, then the
Page 355 U. S. 408
seller's otherwise unlawful price falls within the protection of
§ 2(b). But where, as here, a seller establishes a discriminatory
pricing system, this system does not acquire the protection of §
2(b) simply because, in fact, use of the system holds a customer
against a competitive offer. In other words, a discriminatory
pricing system which in fact meets competition is not a good faith
meeting of competition within the meaning of the Act. The
effectiveness of the system does not demonstrate the good faith of
its initiator.
Third. The mere fact that a competitor offered the
lower price does not mean that Standard can lawfully meet it.
Standard's system of price discrimination, shown not to be in "good
faith," cannot be justified by showing that competitors were using
the same system.
"This startling conclusion is admissible only upon the
assumption that the statute permits a seller to maintain an
otherwise unlawful system of discriminatory prices, merely because
he had adopted it in its entirety, as a means of securing the
benefits of a like unlawful system maintained by his
competitors."
Federal Trade Comm'n v. A. E. Staley Mfg. Co., supra,
at
324 U. S. 753.
See also Federal Trade Comm'n v. Cement Institute, supra,
at
333 U. S.
725.
We said in
Standard Oil Co. v. Federal Trade
Commission, 340 U. S. 231,
340 U. S.
250,
"Congress meant to permit the natural consequences to follow the
seller's action in meeting in good faith a
lawful and equally
low price of its competitor."
(Italics added.) It is only a
lawful lower price that
may be met. Were it otherwise, then the law to govern is not the
Robinson-Patman Act but the law of the jungle. The point we have
now reached was seen by Congressman Utterback, one of the managers
of the bill in conference. What he said should dispose of this
case:
"This procedural provision cannot be construed as a
carte
blanche exemption to violate the bill so long
Page 355 U. S. 409
as a competitor can be shown to have violated it first, nor so
long as that competition cannot be met without the use of
oppressive discriminations in violation of the obvious intent of
the bill."
"To illustrate: the House committee hearings showed a
discrimination of 15 cents a box granted by Colgate-Palmolive-Peet
Co. on sales of soap to the A. & P. chain. Upon a complaint and
hearing before the Federal Trade Commission, this proviso would
permit the Colgate Co. to show in rebuttal evidence, if such were
the fact, an equally low price made by a local soap manufacturer in
Des Moines, Iowa, to A. & P.'s retail outlets in that city; but
this would not exonerate it from a discrimination granted to A.
& P. everywhere, if otherwise in violation of the bill."
"But the committee hearings show a similar discount of 15 cents
a case granted by Procter & Gamble to the same chain. If this
proviso were construed to permit the showing of a competing offer
as an absolute bar to liability for discrimination, then it would
nullify the act entirely at the very inception of its enforcement,
for, in nearly every case, mass buyers receive similar
discriminations from competing sellers of the same product. One
violation of law cannot be permitted to justify another. As in any
case of self-defense, while the attack against which the defense is
claimed may be shown in evidence, its competency as a bar depends
also upon whether it was a legal or illegal attack. A
discrimination in violation of this bill is, in practical effect, a
commercial bribe to lure the business of the favored customer away
from the competitor, and, if one bribe were permitted to justify
another, the bill would be futile to achieve its plainly intended
purposes."
80 Cong.Rec. 9418. (Italics added.)
Page 355 U. S. 410
When we let Standard classify a "retailer" as a "jobber" and
grant a discriminatory price pursuant to arbitrary requirements
merely because a competitor employs the same system, [
Footnote 2/2] we make this provision of the
Robinson-Patman Act ineffective. We should read the Act in a more
hospitable way and allow Standard to maintain its discriminatory
price schedule for retailers if and only if it can show
(a) that that price was justified on the basis of costs or
function, or
(b) that it was in good faith meeting the lawful offer of a
competitor, rather than merely matching a predatory price system,
or meeting a competitor's "pirating" offers, to use the Court's
word, with a "pirating" system of its own.
I would reverse this judgment and direct enforcement of the
Commission's order.
[
Footnote 2/1]
Standard's answer to the complaint admits as much if the
conclusory allegations as to Standard's good faith are ignored.
Paragraph 17 of the answer alleged:
"Respondent alleges that its general policy and practice of
bona fidely selecting and classifying gasoline customers
as wholesale or jobber customers, as distinguished from retail
resellers, is as follows:"
"That such wholesale or jobber customer so classified shall have
adequate bulk storage of his own; that he be equipped to receive
bulk deliveries by tank car or truck train into such storage; that
he have adequate distribution and delivery facilities; that he make
tank car purchases in substantial volume, and do a continuing
substantial volume of business as a
bona fide gasoline
dealer maintaining and operating an established gasoline business;
that he have satisfactory credit rating; that he maintain a
sufficient personnel and all requisite facilities and equipment to
adequately operate his business, service his customers, and perform
his functions as a wholesaler or jobber, and assume the hazard and
expense of fully operating his own business."
"Respondent alleges that each of the four customers named in
Paragraph Three of the Complaint fully, fairly, and reasonably
falls within not only the requirements set forth in Paragraph 17
above, but within all fair, reasonable, usual and proper
requirements for classification as a wholesaler or jobber, and that
each maintains its own adequate bulk storage, delivery tank trucks,
salesmen, and operating personnel; buys in substantial tank car or
truck train lots. . . ."
Moreover, the manager of Standard's Detroit Division, when asked
what characteristics a jobber must have to be entitled to the tank
car price, replied:
"He must have equipment; he must have equipped himself with bulk
storage, and, by bulk storage, I mean sufficient storage so that he
can take care of tank car quantities of gasoline; he should have a
volume of business amounting to about 1,000,000 to 2,000,000
gallons per year; his credit responsibility and so forth must be
satisfactory; he should have an established business."
Also, with one exception for a short period, the favored
"jobbers" always received the same price.
[
Footnote 2/2]
The Commission's findings stated:
"In selecting the customers or prospective customers to whom
[Standard] will grant the tank-car price on gasoline, the
respondent's criterion is now, and for many years has been, that
the customer or prospective customer make annual purchases of not
less than from one to two million gallons of gasoline have storage
facilities sufficient to accept delivery in tank-car quantities,
and have a credit standing assuring payment for large volume
purchases. This is the same criterion which for many years has also
been applied by the respondent's major competitors, and, under it,
any question of the distributive function performed by the
purchaser, that is, whether the purchaser is a retail dealer
selling to the public or a wholesaler selling to retail dealers, is
wholly immaterial."
49 F.T.C. 923, 953.