In order to meet the bid of a favored buyer, a seller's broker
reduced his brokerage commission from 5% to 3%, which was reflected
in the seller's reduction of the price of apple concentrate from
$1.30 per gallon to $1.25 per gallon; the sale was consummated at
that price; and similar concessions were granted on subsequent
sales to the same buyer, but not to any other buyer.
Held: the seller's broker violated § 2(c) of the
Clayton Act, as amended by the Robinson-Patman Act, which makes it
unlawful for "any person" to make any allowance in lieu of
"brokerage" to the "other party to such transaction." Pp.
363 U. S.
167-177.
(a) A seller's broker is included within the term "any person"
as used in § 2(c). P.
363 U. S.
170.
(b) Such an allowance was not made lawful by the proviso of §
2(a) which exempts from the prohibitions of that section price
differentials based on savings in selling costs resulting from
differing methods of distribution. Pp.
363 U. S.
170-174.
(c) The fact that the buyer was not aware that its favored price
was based in part on a discriminatory reduction in the broker's
commission is immaterial. Pp.
363 U. S.
174-175.
(d) Section 2(c) applies to payments or allowances by a seller's
broker to a buyer, whether made directly to the buyer or indirectly
through the seller. Pp.
363 U. S.
175-176.
261 F.2d 725, reversed.
Page 363 U. S. 167
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
Section 2(c) of the Clayton Act, as amended by the
Robinson-Patman Act, [
Footnote
1] makes it unlawful for "any person" to make an allowance in
lieu of "brokerage" to the "other party to such transaction." The
question is whether that prohibition is applicable to the following
transactions by respondent.
Respondent is a broker or sales representative for a number of
principals who sell food products. One of the principals is Canada
Foods Ltd., a processor of apple concentrate and other products.
Respondent agreed to act for the Canada Foods for a 5% Commission.
Other brokers working for the same principal were promised a 4%
Commission. Respondent's commission was higher because it stocked
merchandise in advance of sales. Canada Foods established a price
for its 1954 pack of apple concentrate at $1.30 per gallon in
50-gallon drums and authorized its brokers to negotiate sales at
that price.
The J. M. Smucker Co., a buyer, negotiated with another broker,
Phipps, also working for Canada Foods, for apple concentrate.
Smucker wanted a lower price than $1.30, but Canada Foods would not
agree. Smucker finally offered $1.25 for a 500-gallon purchase.
That was turned
Page 363 U. S. 168
down by Canada Foods, acting through Phipps. Canada Foods took
the position that the only way the price could be lowered would be
through reduction in brokerage. About the same time respondent was
negotiating with Smucker. Canada Foods told respondent what it had
told Phipps, that the price to the buyer could be reduced only if
the brokerage were cut; and it added that it would make the sale at
$1.25 -- the buyer's bid -- if respondent would agree to reduce its
brokerage from 5% To 3%. Respondent agreed and the sale was
consummated at that price and for that brokerage. The reduced price
of $1.25 was thereafter granted Smucker on subsequent sales. But on
sales to all other customers, whether through respondent or other
brokers, the price continued to be $1.30 and, in each instance,
respondent received the full 5% Commission. Only on sales through
respondent to Smucker were the selling price and the brokerage
reduced.
The customary brokerage fee of 5% to respondent would have been
$2,036.84. The actual brokerage of 3% received by respondent was
$1,222.11. The reduction of brokerage was $814.73, which is 50% of
the total price reduction of $1,629.47 granted by Canada Foods to
Smucker.
The Commission charged respondent with violating § 2(c) of the
Act, and, after a hearing and the making of findings, entered a
cease and desist order against respondent. The Court of Appeals,
while not questioning the findings of fact of the Commission,
reversed. 261 F.2d 725. The case is here on writ of certiorari, 360
U.S. 908.
The Robinson-Patman Act was enacted in 1936 to curb and prohibit
all devices by which large buyers gained discriminatory preferences
over smaller ones by virtue of their greater purchasing power. A
lengthy investigation revealed that large chain buyers were
obtaining competitive advantages in several ways other than direct
price
Page 363 U. S. 169
concessions, [
Footnote 2]
and were thus avoiding the impact of the Clayton Act. [
Footnote 3] One of the favorite means
of obtaining an indirect price concession was by setting up "dummy"
brokers who were employed by the buyer and who, in many cases,
rendered no services. The large buyers demanded that the seller pay
"brokerage" to these fictitious brokers, who then turned it over to
their employer. This practice was one of the chief targets of §
2(c) of the Act. [
Footnote 4]
But it was not the only means by which the brokerage function was
abused, [
Footnote 5] and
Congress, in its wisdom, phrased § 2(c) broadly not only to cover
the other methods then in existence, but all other means by which
brokerage could be used to effect price discrimination. [
Footnote 6]
Page 363 U. S. 170
The particular evil at which § 2(c) is aimed can be as easily
perpetrated by a seller's broker as by the seller himself. The
seller and his broker can, of course, agree on any brokerage fee
that they wish. Yet, when they agree upon one, only to reduce it
when necessary to meet the demands of a favored buyer, they use the
reduction in brokerage to undermine the policy of § 2(c). The
seller's broker is clearly "any person" as the words are used in §
2(c) -- as clearly such as a buyer's broker.
It is urged that the seller is free to pass on to the buyer in
the form of a price reduction any differential between his ordinary
brokerage expense and the brokerage commission which he pays on a
particular sale because § 2(a) [
Footnote 7] of the Act permits price differentials based
on savings in selling costs resulting from differing methods of
distribution. From this premise, it is reasoned that a seller's
broker should not be held to have violated § 2(c) for having done
that which is permitted under § 2(a). We need not decide the
validity of that premise, because the fact that a transaction may
not violate one section of the Act does not answer the question
whether another section has been violated. Section 2(c), with which
we
Page 363 U. S. 171
are here concerned, is independent of § 2(a), and was enacted by
Congress because § 2(a) was not considered adequate to deal with
abuses of the brokerage function. [
Footnote 8]
Before the Act was passed, the large buyers, who maintained
their own elaborate purchasing departments and therefore did not
need the services of a seller's broker because they bought their
merchandise directly from the seller, demanded and received
allowances reflecting these savings in the cost of distribution. In
many cases, they required that "brokerage" be paid to their own
purchasing agents. After the Act was passed, they discarded the
facade of "brokerage" and merely received a price reduction
equivalent to the seller's ordinary brokerage expenses in sales to
other customers. When haled before the Commission, they protested
that the transaction was not covered by § 2(c), but, since it was a
price reduction, was governed by § 2(a). They also argued that,
because no brokerage services were needed or used in sales to them,
they were entitled to a price differential reflecting this cost
saving. Congress had anticipated such a contention by the "in lieu
thereof" provision. [
Footnote
9] Accordingly,
Page 363 U. S. 172
the Commission [
Footnote
10] and the courts [
Footnote
11] early rejected the contention that such a price reduction
was lawful because the buyer's purchasing organization had saved
the seller the amount of his ordinary brokerage expense.
In
Great Atlantic & Pacific Tea Co. v. Federal Trade
Comm'n, 106 F.2d 667 (C.A. 3d Cir. 1939), a buyer sought to
evade § 2(c) by accepting price reductions equivalent to the
seller's normal brokerage payments. The court upheld the
Commission's view that the price reduction was an allowance in lieu
of brokerage under § 2(c) and was prohibited even though, in fact,
the seller had "saved" his brokerage expense by dealing directly
with the select buyer. The buyer also sought to justify its
Page 363 U. S. 173
price reduction on the ground that it had rendered valuable
services to the seller. The court rejected this argument also.
Although that court's interpretation of the "services rendered"
exception in § 2(c) has been criticized, [
Footnote 12] its conclusion that the price reduction
was an allowance in lieu of brokerage within the meaning of § 2(c)
has been followed [
Footnote
13] and accepted. [
Footnote
14]
We are asked to distinguish these precedents on the ground that
there is no claim by the present buyer that the price reduction,
concededly based in part on a saving to the seller of part of his
regular brokerage cost on the particular sale, was justified by the
elimination of services normally performed by the seller or his
broker. There is no evidence that the buyer rendered any services
to the seller or to the respondent, nor that anything in its method
of dealing justified its getting a discriminatory price by means of
a reduced brokerage charge. We would have quite a different case if
there were such evidence, and we need not explore the applicability
of § 2(c) to such circumstances. One thing is clear -- the absence
of such evidence and the absence of a claim that the rendition
of
Page 363 U. S. 174
services or savings in distribution costs justified the
allowance does not support the view that § 2(c) has not been
violated.
The fact that the buyer was not aware that its favored price was
based in part on a discriminatory reduction in respondent's
brokerage commission is immaterial. The Act is aimed at price
discrimination, not conspiracy. The buyer's intent might be
relevant were he charged with receiving an allowance in violation
of § 2(c). But certainly it has no bearing on whether the
respondent has violated the law. The powerful buyer who demands a
price concession is concerned only with getting it. He does not
care whether it comes from the seller, the seller's broker, or
both.
Congress enacted the Robinson-Patman Act to prevent sellers and
sellers' brokers from yielding to the economic pressures of a large
buying organization by granting unfair preferences in connection
with the sale of goods. The form in which the buyer pressure is
exerted is immaterial, and proof of its existence is not required.
It is rare that the motive in yielding to a buyer's demands is not
the "necessity" for making the sale. An "independent" broker is not
likely to be independent of the buyer's coercive bargaining power.
He, like the seller, is constrained to favor the buyers with the
most purchasing power. If respondent merely paid over part of his
commission to the buyer, he clearly would have violated the Act. We
see no distinction of substance between the two transactions. In
each case, the seller and his broker make a concession to the buyer
as a consequence of his economic power. In both cases, the result
is that the buyer has received a discriminatory price. In both
cases, the seller's broker reduces his usual brokerage fee to get a
particular contract. There is no difference in economic effect
between the seller's broker splitting his brokerage
Page 363 U. S. 175
commission with the buyer [
Footnote 15] and his yielding part of the brokerage to
the seller to be passed on to the buyer in the form of a lower
price. [
Footnote 16]
We conclude that the statute clearly applies to payments or
allowances by a seller's broker to the buyer, whether made directly
to the buyer, or indirectly, through the seller. The allowances
proscribed by § 2(c) are those made by "any person" which, as we
have said, clearly encompasses a seller's broker. [
Footnote 17] The respondent was a necessary
party to the price reduction granted the buyer. His yielding of
part of his brokerage to be passed on to the buyer was a
sine
qua non of the price reduction. This is not to say that every
reduction in price, coupled with a reduction in brokerage,
automatically compels the conclusion that an allowance "in lieu" of
brokerage has been granted. As the Commission itself has made
clear,
Page 363 U. S. 176
whether such a reduction is tantamount to a discriminatory
payment of brokerage depends on the circumstances of each case.
Main Fish Co., Inc., 53 F.T.C. 88. Nor does this "fuse"
provisions of § 2(a), which permits the defense of cost
justification, with those of § 2(c) which does not; it but
realistically interprets the prohibitions of § 2(c) as including an
independent broker's allowance of a reduced brokerage to obtain a
particular order.
It is suggested that reversal of this case would establish an
irrevocable floor under commission rates. We think that view has no
foundation in fact or in law. Both before and after the sales to
Smucker, respondent continued to charge the usual 5% on sales to
other buyers. There is nothing in the Act, nor is there anything in
this case, to require him to continue to charge 5% on sales to all
customers. [
Footnote 18] A
price reduction based upon alleged savings in brokerage expenses is
an "allowance in lieu of brokerage" when given only to favored
customers. Had respondent, for example, agreed to accept a 3%
Commission on all sales to all buyers there plainly would be no
room for finding that the price reductions were violations of §
2(c). Neither the legislative history nor the purposes of the Act
would require such an absurd result, and neither the Commission nor
the courts have ever suggested it. Here, however, the reduction in
brokerage was made to obtain this particular order and this order
only and therefore was clearly discriminatory.
The applicability of § 2(c) to sellers' brokers under
circumstances not distinguishable in principle from the present
case is supported by a 20-year-old administrative interpretation.
Beginning in 1940, four years after the Act was passed, the
Commission restrained the
Page 363 U. S. 177
practice of brokers who, whether buying and selling on their own
account or acting on behalf of the seller, sold goods to purchasers
who bought through them direct at a reduced price reflecting the
savings made by the elimination of the services of a local broker.
This practice was held to be a violation of § 2(c), not § 2(a).
[
Footnote 19]
If we held that § 2(c) is not applicable here, we would
disregard the history which we have delineated, overturn a settled
administrative practice, and approve a construction that is hostile
to the statutory scheme -- one that would leave a large loophole in
the Act. Any doubts as to the wisdom of the economic theory
embodied in the statute are questions for Congress to resolve.
Reversed.
[
Footnote 1]
Section 2(c) makes it unlawful for
"any person . . . to pay or grant . . . anything of value as a
commission, brokerage, or other compensation, or
any allowance
or discount in lieu thereof, except for services rendered in
connection with the sale or purchase of goods . . . either to the
other party to such transaction or to an . . . intermediary
therein. . . ."
(Emphasis supplied.) 49 Stat. 1527.
[
Footnote 2]
See Final Report on the Chain Store Investigation,
S.Doc. No. 4, 74th Cong., 1st Sess. (1935).
[
Footnote 3]
Section 2 of the Clayton Act, as originally enacted in 1914 (38
Stat. 730), applied only to price discriminations the effect of
which was to "substantially lessen competition or tend to create a
monopoly." This section was modified and retained in § 2(a) as
amended by the Robinson-Patman Act.
See note 7 infra.
[
Footnote 4]
See S.Rep. No. 1502, 74th Cong., 2d Sess., p. 7;
H.R.Rep. No. 2287, 74th Cong., 2d Sess., pp. 14-15;
Federal
Trade Comm. v. Simplicity Pattern Co., 360 U. S.
55,
360 U. S.
69.
[
Footnote 5]
In the Final Report on the Chain-Store Investigation,
note 2 supra, Congress had
before it examples not only of large buyers demanding the payment
of brokerage to their agents, but also instances where buyers
demanded discounts, allowances, or outright price reductions based
on the theory that fewer brokerage services were needed in sales to
these particular buyers, or that no brokerage services were
necessary at all.
Id. at 25, 63. These transactions were
described in the report as the giving of "allowances in lieu of
brokerage" (
id. at 62) or "discount[s] in lieu of
brokerage."
Id. at 27.
[
Footnote 6]
The Report of the House Judiciary Committee described the
brokerage provision as dealing "with the abuse of the brokerage
function for purposes of oppressive discrimination." H.R.Rep. No.
2287, 74th Cong., 2d Sess., p. 14. And, although not mentioned in
the Committee Reports, the debates on the bill show clearly that §
2(c) was intended to proscribe other practices such as the
"bribing" of a seller's broker by the buyer.
See 80
Cong.Rec. 7759-7760, 8111-8112.
[
Footnote 7]
Section 2(a) 15 U.S.C. § 13(a), provides, in relevant part:
"It shall be unlawful for any person engaged in commerce . . .
to discriminate in price between different purchasers of
commodities of like grade and quality . . . where the effect of
such discrimination may be substantially to lessen competition or
tend to create a monopoly . . . 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 . . . shall prevent differentials
which make only due allowance for differences in the cost of
manufacture, sale, of delivery resulting from the differing methods
or quantities in which such commodities are . . . sold or
delivered."
[
Footnote 8]
The bill as reported from the Senate Committee excepted savings
in brokerage from the cost proviso in § 2(a). S.Rep. No. 1502, 74th
Cong., 2d Sess., p. 5. Yet, when the bill was finally passed, the
reference to brokerage in § 2(a) had been deleted. This was done,
according to the Conference Report, "for the reason that the matter
of brokerage is dealt with in a subsequent subsection of the bill."
H.R.Conf.Rep.No. 2951, 74th Cong., 2d Sess., p. 6. By striking the
words "other than brokerage" from § 2(a), we think Congress showed
both an intention that "legitimacy" of brokerage be governed
entirely by § 2(c) and an understanding that the language of § 2(c)
was sufficiently broad to cover allowances to buyers in the form of
price concessions which reflect a differential in brokerage costs.
The legislative history is barren of any indication that a change
in substance was intended by this deletion. Indeed, the Conference
Report clearly precludes any other inference.
[
Footnote 9]
The brokerage clause in the bill was originally directed only at
outright commission payments by sellers to buyers' agents. The
Senate added the phrases "or any allowance or discount in lieu
thereof," and "either to the other party to such transaction (or
his intermediary)." S.Rep. No. 1502, 74th Cong., 2d Sess., p.
7.
"This phrasing of the law was obviously designed to prevent
evasion of the restriction through a mere modification of the form
of the sales contract. It was assumed that large buyers would seek
to convert the brokerage which they had hitherto received into an
outright price reduction."
Zorn and Feldman, Business Under the New Price Laws (1937)
219.
[
Footnote 10]
The Commission has held that a price reduction to favored
buyers, who bought direct without the intervention of a broker,
which was equivalent to brokerage currently paid by the seller to
its brokers for sales to other customers was a violation of § 2(c).
It has issued cease and desist orders against buyers in,
e.g.,
The Great Atlantic & Pacific Tea Co., 26 F.T.C. 486
(1938),
affirmed, 106 F.2d 667 (C.A. 3d Cir. 1939);
General Grocer Co., 33 F.T.C. 377 (1941);
Giant Tiger
Corporation, 33 F.T.C. 830 (1941);
UCO Food
Corporation, 33 F.T.C. 924 (1941);
R. C. Williams &
Co., 33 F.T.C. 1182 (1941);
A. Krasne, Inc., 34
F.T.C. 121 (1941); and against sellers in
Ramsdell Packing
Co., 32 F.T.C. 1187 (1941);
The Union Malleable Mfg.
Co., 52 F.T.C. 408 (1955).
See also several
memorandum decisions reported in 32 F.T.C. 1192, 1193 (1941).
[
Footnote 11]
Great Atlantic & Pacific Tea Co. v. Federal Trade
Comm'n, 106 F.2d 667 (C.A. 3d Cir. 1939);
Southgate
Brokerage Co. v. Federal Trade Comm'n, (C.A. 4th Cir. 1945)
(buyer's broker buying and selling on his own behalf).
[
Footnote 12]
See Report of the Attorney General's National Committee
to Study the Antitrust Laws (1955) 192, 193; Oppenheim, Federal
Antitrust Legislation: Guideposts to a Revised National Antitrust
Policy, 50 Mich.L.Rev. 1139, 1207, n. 178; Rowe, Price
Discrimination, Competition, and Confusion: Another Look at
Robinson-Patman, 60 Yale L.J. 929, 957-958.
[
Footnote 13]
Southgate Brokerage Co. v. Federal Trade Comm'n, supra,
note 11 See also
cases cited,
note 10
supra.
[
Footnote 14]
In speaking of these interpretations of § 2(c), a leading
authority said:
"Here too the Commission and the court have applied the
Congressional intent with precision. If Congress envisaged the evil
as the transmission of brokerage commissions to the buyer, then to
permit the buyer to get the same thing under 2(a) in another form
and name would deprive 2(c) of all substance."
Oppenheim, Administration of the Brokerage Provision of the
Robinson-Patman Act, 8 Geo.Wash.L.Rev. 511, 535.
[
Footnote 15]
See Oliver Bros., Inc. v. Federal Trade Comm'n, 102
F.2d 763, 770.
[
Footnote 16]
The Conference Report states that § 2(c) "prohibits the
direct or
indirect payment of brokerage except
for such services rendered." (Italics supplied.) H.R.Conf.Rep. No.
2951, 74th Cong., 2d Sess., p. 7.
[
Footnote 17]
Several writers, including one of the co-authors of the Act,
have viewed § 2(c) as covering payments or allowances by sellers'
brokers for the benefit of particular buyers.
See Patman,
The Robinson-Patman Act (1938), 102, 108; Austin, Price
Discrimination and Related Problems Under the Robinson-Patman Act,
Am.L.Inst. (rev. ed. 1953), 108. (
See also 2d rev. ed.,
1959, 116); Oppenheim, Administration of the Brokerage Provision of
the Robinson-Patman Act, 8 Geo.Wash.L.Rev. 511, 544 (1940);
Edwards, The Price Discrimination Law (1959), 104. As Patman,
op. cit., supra, at 102, states respecting seller's
brokerage,
"To waive the cost of the brokerage or commission to one
purchaser and assess it against another represents an unfair
discrimination between the purchasers, is an attempt to divorce one
item of cost from the rest when, in fact, they all make up the
whole, and permits a practice to gain foothold which may increase
in such proportions as to demoralize the industry of which it is a
part."
[
Footnote 18]
Cf. Robinson v. Stanley Home Products, Inc., 272 F.2d
601 (C.A. 1st Cir.), where it was held that § 2(c) was not violated
by a seller who eliminated the services of a broker entirely,
converted to direct selling, and thereafter reduced his prices.
[
Footnote 19]
See Albert W. Sisk & Son, 31 F.T.C. 1543 (1940);
C. F. Unruh Brokerage Co., 31 F.T.C. 1557 (1940);
C.
G. Reaburn & Co., 31 F.T.C. 1565 (1940);
William
Silver & Co., 31 F.T.C. 1589 (1940);
H. M. Ruff &
Son, 31 F.T.C. 1573 (1940);
Thomas Roberts & Co.,
31 F.T.C. 1551 (1940);
American Brokerage Co., Inc., 31
F.T.C. 1581 (1940);
W. E. Robinson & Co., 32 F.T.C.
370 (1941);
Custom House Packing Corp., 43 F.T.C. 164
(1946).
We need not view this administrative practice as laying down an
absolute rule that § 2(c) is violated by the passing on of savings
in broker's commissions to direct buyers, for here, as we have
emphasized, the "savings" in brokerage were passed on to a single
buyer who was not shown in any way to have deserved favored
treatment.
MR. JUSTICE WHITTAKER, with whom MR. JUSTICE FRANKFURTER, MR.
JUSTICE HARLAN and MR. JUSTICE STEWART join, dissenting.
The Court holds, in effect, that the action of an independent
broker, engaged by a seller, in reducing his contract rate of
commission for the purpose of enabling the seller to make a sale to
a buyer at a reduced price, constitutes the granting of an
allowance in lieu of "brokerage" by the broker to the buyer, in
violation of § 2(c) of the
Page 363 U. S. 178
Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. §
13(c).
Respondent, an independent broker of Chicago, Illinois, was
engaged by Canada Foods, Ltd., of Kentville, Nova Scotia, to
procure orders for its products upon a commission or "brokerage"
basis of 5% Of the amount of the sales made. Other independent
brokers in the United States were similarly engaged by Canada
Foods, but upon a commission or brokerage basis of 4%. Canada Foods
had announced a price of $1.30 per gallon for its apple
concentrate. Respondent and another independent broker, both acting
on behalf of Canada Foods, separately solicited the J. M. Smucker
Company of Orrville, Ohio, for an order for that product. Smucker
was willing to purchase a quantity of the product, but would pay
only $1.25 per gallon for it. Finally, respondent agreed with
Canada Foods to reduce its commission or brokerage to 3% in order
to permit the latter to accept the Smucker order. Thereupon, Canada
Foods accepted and filled the order, and thereafter paid respondent
a commission of 3% as agreed. Smucker, the buyer, was not advised
that respondent had agreed to reduce its commission charge to the
seller.
Thereafter, in what appears to be the first proceeding of this
type, the Federal Trade Commission charged respondent with granting
and allowing the buyer a portion of its brokerage fee, in violation
of § 2(c) of the Clayton Act, as amended by the Robinson-Patman
Act, 15 U.S.C. § 13(c), and, after hearing, entered a cease and
desist order against it. The Court of Appeals reversed, holding
that respondent, an independent seller's broker, was not covered by
§ 2(c), and moreover had not paid anything of value as a
commission, brokerage, or other compensation to the buyer. 261 F.2d
725. We granted certiorari, 360 U.S. 908.
Page 363 U. S. 179
In reversing the Court of Appeals, the Court now holds that §
2(c)
"clearly applies to payments or allowances by a seller's broker
to the buyer, whether made directly to the buyer, or indirectly,
through the seller."
In my view, no such question is presented on the admitted facts
of this case, and the Court's holding is not supported by the terms
nor the object of § 2(c), but is actually opposed to its declared
purpose as shown by its legislative history.
Section 2(c) makes it
"unlawful for any person . . . to pay or grant . . . anything of
value as a
commission, brokerage, or other compensation, or any
allowance or discount in lieu thereof, except for services
rendered in connection with the sale or purchase of goods . . .
either
to the other party to such transaction
or to an
agent, representative, or other intermediary therein where such
intermediary is acting in fact for or in behalf . . . of any party
to such transaction other than the person by whom such compensation
is so granted or paid. [
Footnote
2/1]"
(Emphasis added.)
The phrase "any person" in § 2(c) includes, of course, even a
truly independent seller's broker. But that only poses the true
question, which is whether an agreement by such a broker to reduce
his commission charge to the seller, thus enabling the seller to
reduce its price, constitutes the paying or granting by the broker
of "
anything
Page 363 U. S. 180
of value as a commission, brokerage, or other
compensation," or an "
allowance or discount in lieu
thereof," to the buyer.
There is no contention here that the buyer made any claim
for
"anything of value
as a commission, brokerage, or other
compensation . . . for services rendered in connection with
the . . . purchase of [the] goods,"
either directly or through any intermediary. Rather, it is
conceded that the buyer did not even know that respondent had
agreed with the seller to reduce its commission charge. Nor is
there any claim that respondent was
"acting in fact for or in behalf . . . of any party to such
transaction other than the [seller] by whom [the concession in
price was] granted."
Rather, it is conceded that it was not. Nor, indeed, is there
any claim that respondent actually paid "anything of value
as a
commission, brokerage, or other compensation" to the buyer or
to any intermediary who was "acting in fact for or in [its]
behalf." What and all respondent did was to reduce its charge to
the seller for its services from 5% To 3%. It must surely be clear
that this did not constitute a violation by respondent of the terms
of § 2(c). For if it did, then all legitimate commission rates are
frozen, in destruction of competition and in actual violation of
the antitrust laws.
I turn now to the purpose of § 2(c) as shown by its legislative
history. The motivating factor behind the enactment of § 2(c) was
the elimination of the practice by large buyers of demanding and
receiving price concessions in the guise of "dummy brokerage"
payments and "allowances" for "services" claimed to have been
rendered to sellers, but which were not actually performed.
[
Footnote 2/2] It
Page 363 U. S. 181
was Congress' purpose to eliminate that evil. Accordingly, it
designed § 2(c) to prohibit payments or allowances of "anything of
value as a commission, brokerage, or other compensation" by a
seller to a buyer, directly or through an intermediary, "where such
intermediary is acting in fact for or in behalf [of the buyer]."
[
Footnote 2/3] Although Congress
took the view that neither a party to the transaction nor his
intermediary could perform legitimate services for the
other party, § 2(c) was not intended to, and did not,
proscribe payments by a seller or a buyer to
Page 363 U. S. 182
his
own broker for services actually rendered to him,
nor did Congress intend to fix or freeze brokerage rates or
otherwise interfere with such legitimate brokerage operations.
[
Footnote 2/4] The purpose of §
2(c), as shown by the legislative history referred to, was not to
embrace or affect legitimately negotiated rates of commission for
brokers' services.
As I have pointed out, this is not a case where the buyer has
claimed or received, either directly or through its intermediary,
any "brokerage" "allowance," or discount in price,
as
compensation for services. [
Footnote 2/5] Nor has the buyer obtained any allowance
or discount because of any "savings" claimed to have been effected
for the seller through elimination by the
buyer or his
broker of services normally performed by the
seller or his
broker. [
Footnote 2/6] I
am,
Page 363 U. S. 183
therefore, unable to see or understand how it may be thought
that the action of respondent in reducing its charge to the seller
from 5% To 3% constituted the granting, either directly or
indirectly, of "
a commission, brokerage, or other compensation,
or any allowance or discount in lieu thereof" to the buyer
within the meaning of those terms as used in § 2(c). Since this
case does not in any way involve any payment or allowance for
services claimed to have been performed by the buyer or his
intermediary, it is simply not the type or kind of case that is
covered and governed by § 2(c). Inasmuch as the legislative history
of § 2(c) shows that Congress did not intend that section to affect
negotiated charges for legitimate brokerage services, I submit that
the Court ought not so extend it by construction.
Until today, it seems always to have been generally understood
that a truly independent broker, such as respondent, was free to
negotiate the rate or amount of his commissions with this principal
without fear of violating § 2(c). [
Footnote 2/7] Such was the expressed congressional
intention. [
Footnote 2/8] Surely,
if the rate or amount of respondent's commissions for services
rendered to Canada Foods had been left to negotiation on each sale,
no one would contend that an agreement by respondent to accept a
commission of 3% for the sale in question would violate § 2(c).
Likewise, there could be no violation of § 2(c) if, instead of
dealing through a broker who charged a 5% Commission, the
Page 363 U. S. 184
seller had dealt through a broker who charged only 3%. But the
Court now holds that an independent seller's broker who has once
agreed with the seller on a general rate of commission may not
renegotiate that rate with his principal in order to effect a sale
that would otherwise be lost to him. The fact that respondent and
the seller had previously entered into an agreement concerning
commission rates should not, in my view, be controlling, for I can
see no sound reason why the seller and his broker must regard such
an agreement as establishing an irrevocable floor under commission
rates or amounts in order to avoid antitrust consequences. The
Court's holding appears to me to be an unwarranted interference
with legitimate brokerage operations, in direct contravention of
congressional intent.
Quite obviously, the Court's real concern in this case is with
the price reduction which this particular buyer has received. But,
while it was the aim of the Robinson-Patman Act to eliminate
discriminatory price advantages which particular buyers might
obtain through unfair means, it should be borne in mind that
Congress did not choose to condemn
all price differences
between purchasers. Section 2(a), designed to deal with outright
price discriminations between purchasers which may lessen
competition, contains, for example, a proviso to the effect
that
"nothing . . . 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.
[
Footnote 2/9]"
This proviso was
Page 363 U. S. 185
incorporated for the purpose of
"preserving for the public the benefits of efficient marketing
methods while at the same time subjecting to the prohibitions of
the statute those 'unearned' price differentials which could not be
reasonably related to some savings in the seller's costs of
manufacture, sale, or delivery."
Report of the Attorney General's National Committee to Study the
Antitrust Laws (1955), p. 171.
See also H.R.Rep.No. 2287,
74th Cong., 2d Sess., pp. 9-10.
It was the evident intention of Congress in § 2(a) to permit
sellers to pass through to buyers, in the form of reduced prices,
any true savings in the cost of distribution of their goods. There
appears to be no basis for ascribing to Congress an intention by §
2(c) to require a seller who uses the services of a broker in some
sales to do so in all sales, or to require that brokerage rates be
static. Yet this would be the effect of the Commission's contention
that a sale made directly by such a seller to a buyer at a price
that does not include any brokerage constitutes the granting by the
seller to the buyer of brokerage or an allowance in lieu of
brokerage under § 2(c). [
Footnote
2/10] Since a
Page 363 U. S. 186
reduction (or even elimination) of legitimate brokerage fees
paid by the seller to an independent broker representing him might
well constitute a
true saving in the cost of one phase of
the marketing process, such a reduction may, in proper
circumstances validly justify a reduction in price to a particular
buyer. [
Footnote 2/11] Once this
fact is recognized, and is coupled with an understanding that the
real purpose of § 2(c) was to prohibit allowances by a seller based
on services claimed to have been performed,
Page 363 U. S. 187
to the benefit of the seller,
by the buyer or his
broker, I would think there is no choice but to conclude that
the transaction here in question was one which Congress
contemplated would be actionable only in a proceeding under § 2(a),
subject to any valid "cost justification" defense. The high
standards of proof required to sustain a "cost justification"
defense in a § 2(a) proceeding eliminate any possibility of
establishing as a
true cost saving any reduction in
brokerage commissions made as a subterfuge for the granting of an
allowance or discount as a rebate to a buyer, whether or not as the
result of coercive pressure of the buyer upon the seller or his
broker. [
Footnote 2/12]
However, under the expansive reading which the Court now gives §
2(c), in opposition, I believe, to its legislative history, this
provision may now be applied to prohibit a price reduction granted
by a seller to a buyer, even though such price reduction may be
well based solely on true savings arising from a reduction in the
cost of legitimate brokerage services performed
by the seller's
own broker. I am unable to perceive any basis for a conclusion
that respondent's reduction of its brokerage charge to the seller,
and the seller's consequent reduction in price to the buyer,
violated the provisions of § 2(c). That conclusion seems to me to
be an obvious thwarting of the intention of Congress to allow
true cost savings to be passed through to buyers.
Page 363 U. S. 188
Indeed, the Court itself seems to display some concern for the
potential sweep of today's decision. It declares that its
interpretation of the statute includes "an independent broker's
allowance of a reduced brokerage to obtain a particular order," and
it is at pains to point out that "the reduction in brokerage was
made to obtain this particular order and this order only and
therefore was clearly discriminatory." The Court also asserts that
its holding in this case should
not be understood to
mean
"that every reduction in price, coupled with a reduction in
brokerage, automatically compels the conclusion that an allowance
'in lieu' of brokerage has been granted,"
indicating that "whether such a reduction is tantamount to a
discriminatory payment of brokerage depends on the circumstances of
each case." Even further, the Court makes it clear that it does
not intend to approve any absolute rule that § 2(c) is
violated in every case where savings in brokerage are passed on to
buyers -- justifying its holding in this case by stating that "the
savings' in brokerage were passed on to a single buyer who was
not shown in any way to have deserved favored treatment."
To me, these efforts by the Court to so limit its holding
represent a clear recognition of the fact that, in some cases, a
reduction or elimination of brokerage costs might well justify a
valid reduction in price by a seller to a particular buyer, and, in
such cases, the Court is apparently quite prepared to hold that §
2(c) would not be violated. But, as I read § 2(c), either its terms
are not applicable to any case where a price reduction results from
a reduction in the seller's legitimate brokerage costs or they are
applicable to
all such cases. Section 2(c) does
not expressly require discrimination between purchasers as
an element of its proscriptions, nor does it provide any defenses
based on legitimate savings in brokerage costs; only § 2(a)
contains such provisions. And, as we said just last Term in
Page 363 U. S. 189
construing § 2(e) of the Act, "[w]e cannot supply what Congress
has studiously omitted."
Federal Trade Comm'n v. Simplicity
Pattern Co., 360 U. S. 55,
360 U. S.
67.
I can only conclude that, by leaving the door open for cases in
which a reduction in price based on a saving in the seller's
brokerage costs may, in its view, be validly justified, the Court
has done one of two things. Either it has, in this § 2(c) case,
recognized and applied the true purposes and policies underlying §
2(a), tested the validity of a "cost justification" defense in this
case under that section, and concluded
sub silentio that
none could be made out here, or it has, despite our holding in
Simplicity Pattern, supra, and notwithstanding its own
disclaimer, fused the provisions of § 2(a) with those of § 2(c),
and thereby weakened materially the
per se thrust which
Congress intended that § 2(c), when applicable, would have.
In my view, § 2(c) is not applicable to any case of this type,
for, in such a case, there is no payment of "brokerage" or an
"allowance or discount in lieu thereof" to the buyer, as I
understand the meaning of those terms as used in the statute. For
me,
every case presenting this type of situation is
actionable only under § 2(a), for it seems clear that § 2(a), which
is expressly concerned with discrimination between purchasers, with
effects on competition, and with the possible existence of true
cost savings, was designed by Congress to cover this type of case.
And, in a § 2(a) proceeding, the challenged party will be afforded
an opportunity to establish the validity of the price reduction in
question -- an opportunity not afforded under the terms of § 2(c).
The Court's adroit footwork in this regard serves quite effectively
to illustrate the reasons why I think the case before us is one
which Congress intended should be actionable under § 2(a), rather
than § 2(c), and I would therefore affirm the judgment of the Court
of Appeals.
[
Footnote 2/1]
Section 2(c), 15 U.S.C. § 13(c), provides in full that:
"It shall be unlawful for any person engaged in commerce, in the
course of such commerce, to pay or grant, or to receive or accept,
anything of value as a commission, brokerage, or other
compensation, or any allowance or discount in lieu thereof, except
for services rendered in connection with the sale or purchase of
goods, wares, or merchandise, either to the other party to such
transaction or to an agent, representative, or other intermediary
therein where such intermediary is acting in fact for or in behalf,
or is subject to the direct or indirect control, of any party to
such transaction other than the person by whom such compensation is
so granted or paid."
[
Footnote 2/2]
"Among the prevalent modes of discrimination at which this bill
is directed is the practice of certain large buyers to demand the
allowance of brokerage direct to them upon their purchases, or its
payment to an employee, agent, or corporate subsidiary whom they
set up in the guise of a broker, and through whom they demand that
sales to them be made. Whether employed by the buyer in good faith
to find a source of supply, or by the seller to find a market, the
broker so employed discharges a sound economic function, and is
entitled to appropriate compensation by the one in whose interest
he so serves. But to permit its payment or allowance where no such
service is rendered, where, in fact, if a 'broker,' so labeled,
enters the picture at all, it is one whom the buyer points out to
the seller, rather than one who brings the buyer to the seller, is
but to permit the corruption of this function to the purposes of
competitive discrimination. The relation of the broker to his
client is a fiduciary one. To collect from a client for services
rendered in the interest of a party adverse to him is a violation
of that relationship, and to protect those who deal in the streams
of commerce against breaches of faith in its relations of trust is
to foster confidence in its processes, and promote its
wholesomeness and volume."
S.Rep. No. 1502, 74th Cong., 2d Sess., p. 7.
See also
H.R.Rep. No. 2287, 74th Cong., 2d Sess., pp. 14-15.
[
Footnote 2/3]
"Section [(c)] permits the payment of compensation by a seller
to his broker or agent for services actually rendered in his
behalf; likewise by a buyer to his broker or agent for services in
connection with the purchase of goods actually rendered in his
behalf; but it prohibits the direct or indirect payment of
brokerage except for such services rendered. It prohibits its
allowance by the buyer direct to the seller, or by the seller
direct to the buyer; and it prohibits its payment by either to an
agent or intermediary acting in fact for or in behalf, or subject
to the direct or indirect control, of the other."
H.R.Rep. No. 2287, 74th Cong., 2d Sess., p. 15.
See
also the Conference Committee Report, H.R.Conf.Rep. No. 2951,
74th Cong., 2d Sess., p. 7.
[
Footnote 2/4]
As stated by Senator Logan on the Senate floor:
"The bill has nothing to do with brokerage at all. The bill
deals with schemes and shams used to bring about discriminations in
prices. . . . A legitimate broker can charge whatever his employer
may be willing to pay without the violation of any provisions of
the proposed act."
80 Cong.Rec. 3118.
"
* * * *"
"I shall now speak of the matter of brokerage. Let me say in the
beginning that the bill does not affect legitimate brokerage,
either directly or indirectly. Where the broker renders service to
the buyer or to the seller, the bill does not prohibit the payment
of brokerage. It is not aimed at the legitimate practice of
brokerage, because brokerage is necessary. The broker has a field
all his own, and he should not be interfered with."
80 Cong.Rec. 6281.
[
Footnote 2/5]
See Biddle Purchasing Co. v. Federal Trade Comm'n, 96
F.2d 687 (C.A. 2d Cir.);
Oliver Bros., Inc. v. Federal Trade
Comm'n, 102 F.2d 763 (C.A. 4th Cir.).
[
Footnote 2/6]
See Great Atlantic & Pacific Tea Co. v. Federal Trade
Comm'n, 106 F.2d 667 (C.A. 3d Cir.), and
Southgate
Brokerage Co., Inc. v. Federal Trade Comm'n, 150 F.2d 607
(C.A. 4th Cir.), in which the buyer claimed to have effected a
"saving" in distribution costs for the seller because of services
performed by the buyer's purchasing organization. Such cases must
be distinguished from those in which the nature of the seller's own
operation, without more, enables it to effect legitimate savings in
brokerage and other distribution costs.
[
Footnote 2/7]
See, e.g., Report of the Attorney General's National
Committee to Study the Antitrust Laws (1955) 190-191; Oppenheim,
Federal Antitrust Legislation: Guideposts to a Revised National
Antitrust Policy, 50 Mich.L.Rev. 1139, 1207, n. 178.
[
Footnote 2/8]
See 363
U.S. 166fn2/4|>note 4.
[
Footnote 2/9]
Section 2(a) of the Clayton Act, as amended by the
Robinson-Patman Act, 15 U.S.C. § 13(a), provides, in pertinent
part:
"It shall be unlawful for any person engaged in commerce, in the
course of such commerce, either directly or indirectly, to
discriminate in price between different purchasers of commodities
of like grade and quality . . . where the effect of such
discrimination may be substantially to lessen competition or tend
to create a monopoly in any line of commerce, or to injure,
destroy, or prevent competition with any person who either grants
or knowingly receives the benefit of such discrimination, or with
customers of either of them:
Provided, That nothing
contained in sections 12, 13, 14-21, and 22-27 of this title 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. . . ."
[
Footnote 2/10]
The Commission has expressed such a view in several early
proceedings,
see, e.g., Albert W. Sisk & Son, 31
F.T.C. 1543 (1940);
C. F. Unruh Brokerage Co., 31 F.T.C.
1557 (1940);
W. E. Robinson & Co., 32 F.T.C. 370
(1941);
Ramsdell Packing Co., 32 F.T.C. 1187 (1941);
Custom House Packing Corp., 43 F.T.C. 164 (1946), but that
view is in conflict with the terms of § 2(c), and does not accord
with the congressional intent.
[
Footnote 2/11]
When § 2(a) emerged from the Senate Committee, the "cost
justification" proviso contained an addition to the clause,
permitting:
". . . differentials which make only due allowance for
differences in the cost,
other than brokerage, of
manufacture, sale, or delivery resulting from the differing methods
or quantities in which such commodities are to such purchasers sold
or delivered. . . ."
(Emphasis added.) This addition was explained as having been
deemed necessary "to harmonize this subsection with subsection
[(c)] considered below, which deals directly with the question of
brokerage." S.Rep. No. 1502, 74th Cong., 2d Sess., p. 5.
In discussion on the Senate floor with respect to this addition,
Senator Logan commented:
"I think perhaps legitimate brokerage ought to be allowed as a
part of the costs, and I think, when the bill was drafted -- I did
not write the bill -- perhaps, in the amendment which was inserted
by the Judiciary Committee of the Senate, we had in mind dummy
brokerage, sham brokerage. It may be that something should be done
about that. I call it to the attention of the Senate, so that some
of the other Senators may consider it."
80 Cong.Rec. 6285.
The Conference Committee then deleted the phrase "other than
brokerage" from the proviso, "for the reason that the matter of
brokerage is dealt with in a subsequent subsection of the bill."
H.R.Conf.Rep. No. 2951, 74th Cong., 2d Sess., p. 6.
In view of the meaning of "brokerage" as used in § 2(c) and the
elimination of the phrase "other than brokerage" from the "cost
justification" proviso, it seems clear to me that a reduction in
price based on savings in
legitimate brokerage costs is
among the reductions which Congress intended might be validly
justified under the § 2(a) proviso.
[
Footnote 2/12]
I intimate no view on whether a valid "cost justification"
defense would be available in a § 2(a) proceeding on the facts of
this case.
The Court of Appeals for the First Circuit has recently
recognized the fundamental differences between § 2(a) and § 2(c),
discussed here.
Robinson v. Stanley Home Products, Inc.,
272 F.2d 601.
See generally Note, 57 Mich.L.Rev. 926.
Of course, § 2(f) of the Clayton Act, as amended by the
Robinson-Patman Act, 15 U.S.C. § 13(f), which makes it
"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,"
may be applicable in a proceeding against the buyer.