The Federal Trade Commission (FTC) ruled that respondents, the
corporate owner of a chain of supermarkets (Meyer) and two of its
officers, had unlawfully induced suppliers to engage in
discriminatory pricing and sales promotion activities prohibited by
§§ 2(a) and 2(d) of the Clayton Act, as amended by the
Robinson-Patman Act. The FTC held that § 2(d) prohibits a supplier
from granting promotional allowances to a direct-buying retailer
like Meyer unless the allowances are also made available to
wholesalers who purchase from the supplier and resell to the
direct-buying retailer's competitors. The Court of Appeals adopted
respondents' view that the statutory requirement of proportional
equality among "customers competing in the distribution" of
products concerned competition at the same functional level of
distribution, which did not include competition between
direct-buying retailers and wholesalers, and that retailers
competing with Meyer were not customers of the suppliers, but were
customers of the wholesalers. The court set aside that portion of
the FTC order which barred respondents from inducing suppliers to
grant them promotional allowances not available to "customers who
resell to purchasers who compete with respondents in the resale of
such supplier's products."
Held: On the facts of this case, § 2(d) reaches only
discrimination between customers competing for resales at the same
functional level. Pp.
390 U. S.
348-358.
(a) The Act does not mandate proportional equality between the
direct-buying retailer, Meyer, and the wholesalers. Pp.
390 U. S.
348-349, 355-357.
(b) "Customer" in § 2(d) includes a retailer who buys through
wholesalers and competes with a direct-buying retailer in the
resale of the supplier's products. Pp.
390 U. S.
348-352.
(c) The FTC found that Meyer competed in the resale of certain
suppliers' products with other retailers in the area who
Page 390 U. S. 342
purchased the products through wholesalers, and the Court of
Appeals did not disturb this finding. P.
390 U. S.
354.
(d) Since, in this case, the direct impact of the discriminatory
promotional allowances is felt by the disfavored retailers, the
most reasonable construction of § 2(d) is one which places on the
supplier the responsibility for making promotional allowances
available to those resellers who compete directly with the favored
buyer. P.
390 U. S.
357.
(e) A supplier may, consistently with the other provisions of
the antitrust laws, utilize his wholesalers to distribute payments
or administer promotional programs, as long as the supplier assumes
responsibility, under the FTC's rules, for seeing that the
allowances are made available to all who compete in the resale of
his products. P.
390 U. S.
358.
359 F.2d 351, reversed in part and remanded.
MR. CHIEF JUSTICE WARREN delivered the opinion of the Court.
The Federal Trade Commission, after extensive proceedings, ruled
that respondents, the corporate owner of a chain of supermarkets
and two of its officers, had unlawfully induced certain suppliers
to engage in discriminatory pricing and sales promotional
activities prohibited by §§ 2(a) and 2(d) of the Clayton Act, as
amended
Page 390 U. S. 343
by the Robinson-Patman Act. [
Footnote 1] 63 F.T.C. (1963). The Court of Appeals for the
Ninth Circuit disagreed with the Commission's construction of §
2(d), and reversed in part its ruling that the section had been
violated. 359 F.2d 351 (1966). We granted certiorari, 386 U.S. 907
(1967), because the case presents important questions concerning
the scope of a key provision of the Robinson-Patman Act.
I
Section 2(d) makes it unlawful for a supplier in interstate
commerce to grant advertising or other sales promotional allowances
to one "customer" who resells the supplier's "products or
commodities" unless the allowances are "available on proportionally
equal terms to all other customers competing in the distribution of
such products or commodities." [
Footnote 2] Although we have limited our review of this
case to one aspect of the alleged § 2(d)
Page 390 U. S. 344
violations, [
Footnote 3]
full understanding of the issues requires a brief exposition of the
facts from which the Commission concluded that respondents had
induced violations of both §§ 2(a) and 2(d). The relevant facts
found by the Commission were not disturbed by the Court of
Appeals.
Respondent Fred Meyer, Inc. , operates a chain of 13
supermarkets in the Portland, Oregon, area which engage in the
retail sale of groceries, drugs, variety items, and a limited line
of clothing. In 1957, Meyer's sales exceeded $40,000,000. According
to its 1960 prospectus, it made one-fourth of the retail food sales
in the Portland area, and was the second largest seller of all
goods in that area. Since 1936, Meyer has conducted annually a
four-week promotional campaign in its stores based on the
distribution of coupon books to consumers. The books usually
contain 72 pages, each page featuring a single product being sold
by Meyer at a reduced price. The consumer buys the book for the
nominal sum of 10� and must surrender the appropriate coupon when
making his purchase of goods. A coupon often represents a
reduction
Page 390 U. S. 345
of one-third or more from Meyer's regular price for the featured
item, and the cover of the 1957 book stated that the use of all 72
coupons would result in total savings of more than $54. The
promotional campaign is highly successful. Meyer sold 138,700 books
in 1957 and 121,270 in 1958. Aside from the nominal 10� paid by
consumers for the coupon books, Meyer finances the promotion by
charging the supplier of each featured product a fee of at least
$350 for each coupon-page advertising his product. [
Footnote 4] Some participating suppliers
further underwrite the promotion by giving Meyer price reductions
on its purchases of featured items, by replacing at no cost a
percentage of the goods sold by Meyer during the campaign, or by
redeeming coupons in cash at an agreed rate.
The Commission concluded that this promotional scheme, as
conducted in the years 1956 through 1958, violated §§ 2(d) and 2(a)
in the following respects: first, the $350 paid to Meyer by each of
four suppliers participating in the campaigns represented
promotional allowances paid in violation of § 2(d) because similar
allowances were not made available on proportionally equal terms to
competing customers. Second, the additional value given Meyer by
these suppliers in the form of discounts, free replacements of
goods sold and coupon redemptions amounted to price discrimination
prohibited by § 2(a). [
Footnote
5] The Commission held that, by inducing the suppliers to
discriminate in price, respondents had violated
Page 390 U. S. 346
§ 2(f) of the Act, [
Footnote
6] and that, by inducing them to grant discriminatory
promotional allowances, respondents had engaged in an unfair method
of competition in violation of § 5(a) of the Federal Trade
Commission Act. [
Footnote
7]
Both before the Commission and in the Court of Appeals,
respondents argued that it was not established that two
participating suppliers, Tri-Valley Packing Association and Idaho
Canning Company, had violated § 2(d). Meyer purchased directly from
both of these suppliers. Tri-Valley participated in the 1957
promotion by paying Meyer $350 for a coupon-page featuring
Tri-Valley's brand of canned peaches and by replacing in
merchandise every third can sold by Meyer on the coupon's offer of
three cans for the price of two. Idaho Canning participated in the
1957 promotion on substantially identical terms, except that the
coupon-page it purchased offered three cans of corn for the price
of two. The Commission found that two wholesalers, Hudson House and
Wadhams & Co. , both of which resold to Meyer's retail
competitors, had been disfavored in these transactions in that
Hudson House had purchased canned peaches from Tri-Valley and both
Hudson House and Wadhams had purchased canned corn from Idaho
Canning,
Page 390 U. S. 347
but neither of the two wholesalers had been accorded promotional
allowances comparable to those received by Meyer. Respondents
argued that, purely as a matter of statutory construction,
Tri-Valley and Idaho Canning could not have violated the
requirement of proportional equality among "customers competing in
the distribution" of their products, because (1) Meyer, a retailer,
was not "competing" in the distribution of canned corn and peaches
with the disfavored wholesalers, Hudson House and Wadhams, and (2)
the retailers found by the Commission to be competing with Meyer in
the resale of these products were not "customers" of Tri-Valley and
Idaho Canning, but were customers of Hudson House and Wadhams.
The Commission rejected this reading of § 2(d), noting that, if
respondents' view prevailed, a retailer buying from a wholesaler
and having no direct dealings with his supplier would receive no
protection against discriminatory promotional allowances given his
competitor who purchased directly from the supplier. The Commission
held that § 2(d) prohibits a supplier from granting promotional
allowances to a direct-buying retailer, such as Meyer, unless the
allowances are also made available to wholesalers who purchase from
the supplier and resell to the direct-buying retailer's
competitors. Accordingly, the Commission's cease and desist order
included a provision barring respondents from inducing suppliers to
grant them promotional allowances not available to "customers who
resell to purchasers who compete with respondents in the resale of
such supplier's products." 63 F.T.C. at ___. One Commissioner,
while agreeing with the majority that respondents had induced
Tri-Valley and Idaho Canning to violate § 2(d), dissented in part
on the ground that the order should have required the promotional
allowances to be made available to the retailers competing with
Meyer, rather than to
Page 390 U. S. 348
wholesalers who resold to them. [
Footnote 8] Thus, in his view, the competing retailers
were "customers" of Tri-Valley and Idaho Canning within the meaning
of the statute. The Court of Appeals adopted the interpretation of
§ 2(d) urged by respondents. Consequently, it set aside the portion
of the Commission's order set out above.
We agree with the Commission that the proscription of § 2(d)
reaches the kind of discriminatory promotional allowances granted
Meyer by Tri-Valley and Idaho Canning. Therefore, we reverse the
judgment of the Court of Appeals on this point. However, because we
have concluded that Meyer's retail competitors, rather than the two
wholesalers, were competing customers under the statute, we also
remand the case for appropriate modification of the Commission's
order. We deal first with respondents' arguments, second with the
opinion of the Court of Appeals, and third with the Commission's
order.
II
Respondents press upon us a view of § 2(d) which leaves
retailers who buy from wholesalers for the most part unprotected
from discriminatory promotional allowances granted their
direct-buying competitors. We are told that § 2(d) in specific
terms requires this result. To benefit from the statute's
requirement of proportional equality, it is urged, a buyer must be
a "competing customer" within the narrowest sense of that phrase.
Thus, the wholesalers in this case are not competing customers,
because they do not compete with Meyer, and the retailers who do
compete with Meyer in the resale of the suppliers' products are
outside the protection of § 2(d) because they are not customers of
the suppliers. For reasons stated below, we agree with respondents
that, on
Page 390 U. S. 349
the facts of this case, § 2(d) reaches only discrimination
between customers competing for resales at the same functional
level and, therefore, does not mandate proportional equality
between Meyer and the two wholesalers. [
Footnote 9] But we cannot accept the second half of this
argument, for it rests on a narrow definition of "customer" which
becomes wholly untenable when viewed in light of the central
purpose of § 2(d) and the economic realities with which its framers
were concerned.
Conceding that the Robinson-Patman amendments by no means
represent an exemplar of legislative clarity, [
Footnote 10] we cannot, in the absence of an
unmistakable directive, construe the Act in a manner which runs
counter to the broad goals which Congress intended it to
effectuate.
See, e.g., FTC v. Sun Oil Co., 371 U.
S. 505,
371 U. S.
516-521 (1963);
Elizabeth Arden Sales Corp. v. Gus
Blass Co., 150 F.2d 988, 991-993 (C.A. 8th Cir.),
cert.
denied, 326 U.S. 773 (1945). We start with the proposition
that
"[t]he 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."
FTC v. Henry Broch & Co., 363 U.
S. 166,
363 U. S. 168
(1960). The role within the statutory scheme which Congress
intended for § 2(d) is well documented in the legislative history.
An investigation of chain store buying practices undertaken by the
Federal Trade Commission, at Congress' request, [
Footnote 11] had
Page 390 U. S. 350
indicated that § 2 of the Clayton Act was an inadequate
deterrent against outright price discrimination. [
Footnote 12] The investigation also
revealed that certain practices by which large buyers induced
concessions which their smaller competitors could not obtain were
wholly beyond the reach of § 2. [
Footnote 13] It is significant that congressional concern
had focused on the buying practices of large retailers,
particularly the chain stores, because it was felt that they were
threatening the continued existence of the independent merchant.
[
Footnote 14] Indeed, before
Congress acted, some States had attempted to limit the growth of
retail chains through express prohibitions against further
extensions and through taxation. [
Footnote 15] One of the practices disclosed by the
Commission's investigation was that by which large retailers
induced concessions
Page 390 U. S. 351
from suppliers in the form of advertising and other sales
promotional allowances. [
Footnote 16] The draftsman of the provision which
eventually emerged as § 2(d) explained that, even when such
payments were made for actual sales promotional services, they were
a form of indirect price discrimination because the recipient of
the allowances could shift part of his advertising costs to his
supplier while his disfavored competitor could not. [
Footnote 17] That Congress adopted this
view of the practice it sought to eliminate by § 2(d) is
demonstrated by the words used by the Senate Judiciary Committee in
recommending enactment of the section:
"Still another favored medium for the granting of oppressive
discriminations is found in the practice of large buyer customers
to demand, and of their sellers to grant, special allowances in
purported payment of advertising and other sales promotional
services which the customer agrees to render with reference to the
seller's products, or sometimes with reference to his business
generally. Such an allowance becomes unjust when the service is not
rendered as agreed and paid for or when, if rendered, the payment
is grossly in excess of its value, or when, in any case, the
customer is deriving from it equal benefit to his own business, and
is thus enabled to shift to his vendor substantial portions of his
own advertising cost while his smaller competitor, unable to
command such allowances, cannot do so. [
Footnote 18] "
Page 390 U. S. 352
Congress chose to deter such indirect price discrimination by
prohibiting the granting of sales promotional allowances to one
customer unless accorded on proportionally equal terms to all
competing customers.
Of course, neither the Committee Report nor other parts of the
legislative history in so many words define "customer" to include
retailers who purchase through wholesalers and compete with direct
buyers in resales. But a narrower reading of § 2(d) would lead to
the following anomalous result. On the one hand, direct-buying
retailers like Meyer, who resell large quantities of their
suppliers' products and therefore find it feasible to undertake the
traditional wholesaling functions for themselves, would be
protected by the provision from the granting of discriminatory
promotional allowances to their direct-buying competitors. On the
other hand, smaller retailers, whose only access to suppliers is
through independent wholesalers, would not be entitled to this
protection. Such a result would be diametrically opposed to
Congress' clearly stated intent to improve the competitive position
of small retailers by eliminating what was regarded as an abusive
form of discrimination. If we were to read "customer" as excluding
retailers who buy through wholesalers and compete with direct
buyers, we would frustrate the purpose of § 2(d). We effectuate it
by holding that the section includes such competing retailers
within the protected class.
III
The Commission did not press in the Court of Appeals the
position of one Commissioner that retailers who purchased through
Hudson House and Wadhams and competed with Meyer in resales were
customers of Tri-Valley and Idaho Canning. Consequently, that court
gave almost no consideration to the construction of § 2(d) which we
hold to be the proper one. Citing its prior
Page 390 U. S. 353
ruling in
Tri-Valley Packing Assn. v. FTC, 329 F.2d
694, 709-710 (C.A. 9th Cir.1964), the court merely stated that a §
2(d) violation could not be made out unless (1) Tri-Valley and
Idaho Canning had in some way dealt directly with retailers
competing with Meyer, and (2) canned peaches and corn sold by the
two suppliers could be traced through Hudson House and Wadhams to
the shelves of the competing retailers. 359 F.2d at 359-360,
362-363. In the view of the Court of Appeals, these two
requirements compose the elements of the "indirect customer"
doctrine under which the Commission and the courts impose § 2(d)
liability when a supplier in effect supplants his intermediate
distributors in dealings with those to whom the distributors resell
and favors some of the distributors' accounts over others.
See
American News Co. v. FTC, 300 F.2d 104, 109 (C.A.2d Cir.),
cert. denied, 371 U.S. 824 (1962);
K. S. Corp. v.
Chemstrand Corp., 198 F.
Supp. 310, 312-313 (D.C.S.D.N.Y.1961);
Kay Windsor Frocks,
Inc., 51 F.T.C. 89, 95-96 (1954); F. Rowe, Price
Discrimination Under the Robinson-Patman Act 398-399 (1962), 90
(1964 Supp.). We need not and do not question the validity of this
doctrine as applied to pierce a supplier's unrealistic claim that a
reseller favored by him is actually the customer of an intermediate
distributor. Nor do we reach the question whether a retailer may
succeed in a private action based on § 2(d) without proving that he
in fact resold the supplier's product in competition with a favored
buyer. In the case before us, it is conceded that Meyer was a
customer of Tri-Valley and Idaho Canning. Moreover, as indicated by
its approval of the Commission's § 2(a) ruling, the Court of
Appeals did not question the Commission's finding that Meyer
competed in the resale of Tri-Valley and Idaho Canning products
with retailers who purchased through Hudson
Page 390 U. S. 354
House and Wadhams. [
Footnote
19] Given these findings, it was unnecessary for the Commission
to resort to the indirect customer doctrine. Whether suppliers deal
directly with disfavored competitors or not, they can, and here
did, afford a direct buyer the kind of competitive advantage which
§ 2(d) was intended to eliminate. In light of our holding that
"customers" in § 2(d) includes retailers who buy through
wholesalers and compete with a direct buyer in the resale of the
supplier's product, the requirement of direct dealing between the
supplier and disfavored competitors imposed by the Court of Appeals
rests on too narrow a reading of the statute. Further, in light of
the Commission's finding that Meyer competed in the resale of the
Idaho Canning and Tri-Valley products with other retailers in the
area who purchased through Hudson House and Wadhams, and in light
of the fact that the Court of Appeals did not disturb this finding,
the court misapprehended the Commission's burden in requiring it to
trace those products to the shelves of the disfavored
retailers.
IV
The Commission's view of the impact of respondents' argument in
no way conflicts with our own. In rejecting respondents'
construction of § 2(d), the Commission observed:
"The net result of this argument is that the entire structure of
'independent' food merchants -- including the traditional
wholesaler and his numerous, small retailer-customers -- are placed
completely outside
Page 390 U. S. 355
the pale of Section 2(d) of the amended Clayton Act insofar as
their competition with the direct-buying 'chains' is
concerned."
"
* * * *"
"We are not persuaded that Congress either intended or effected
any such result when it passed Section 2(d). In the first place,
such a construction goes squarely against the well known purposes
of the Act itself, namely, to give the 'independent' food sellers
an even break in their competition with the 'chains.' [
Footnote 20]"
But rather than concluding, as we have, that retailers who
purchased through Hudson House and Wadhams and competed with Meyer
in resales were disfavored customers of Tri-Valley and Idaho
Canning, a majority of the Commission held that the wholesalers,
Hudson House and Wadhams, were the customers entitled to
promotional allowances on proportionally equal terms with Meyer.
Although we approach the Commission's ruling with the deference due
the agency charged with day-to-day administration of the Act, we
hold that, at least on the facts before us, § 2(d) does not require
proportional equality between Meyer and the two wholesalers.
The Commission believed it found support for its position in the
language of § 2(d) itself, which requires that promotional
allowances be accorded on proportionally equal terms to "customers
competing in the
distribution" of a supplier's product,
rather than merely to customers competing in resales. The majority
reasoned that Hudson House and Wadhams, when they resold to Meyer's
retail competitors, were competing with Meyer in the distribution
of Tri-Valley and Idaho Canning products because the two
wholesalers were "seeking exactly the same consumer dollars that
respondents
Page 390 U. S. 356
are after." 63 F.T.C. at ___. While it cannot be doubted that
Congress reasonably could have employed such a broad concept of
competition in § 2(d), we do not believe that the use of the word
"distribution", rather than "resale" is a clear indication that it
did, and what discussion there was of the promotional allowance
provision during the congressional hearings indicates that the
section was meant to impose proportional equality only where buyers
competed on the same functional level. Thus, in reporting the
provision, both the Senate and House Judiciary Committees used the
following example:
"To illustrate: where, as was revealed in the hearings earlier
referred to in this report, a manufacturer grants a particular
chain distributor an advertising allowance of a stated amount per
month per store in which the former's goods are sold, a competing
customer with a smaller number of stores, but equally able to
furnish the same service per store, and under conditions of the
same value to the seller, would be entitled to a similar allowance
on that basis. [
Footnote
21]"
This illustration and others which could be cited are not
conclusive, but they do strongly suggest that the competition with
which Congress was concerned in § 2(d) was that between buyers who
competed in resales of the supplier's products. And, as stated
above, Congress' objective was to assure that all sellers,
regardless of size, competing directly for the same customers would
receive even-handed treatment from their suppliers. [
Footnote 22] We noted in
FTC v. Sun Oil
Co., 371 U. S. 505
(1963), that, when Congress wished to expand the meaning of
competition to include more than resellers
Page 390 U. S. 357
operating on the same functional level, it knew how to do so in
unmistakable terms. It did so in § 2(a) of the Act by prohibiting
price discrimination which may
"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."
Id. at
371 U. S.
514-515;
see FTC v. Morton Salt Co.,
334 U. S. 37,
334 U. S. 55
(1948). We stated in
Sun Oil that:
"There is no reason appearing on the face of the statute to
assume that Congress intended to invoke by omission in § 2(b) the
same broad meaning of competition or competitor which it explicitly
provided by inclusion in § 2(a); the reasonable inference is quite
the contrary. [
Footnote
23]"
In the present case, too, we think "the reasonable inference" is
that Congress did not intend such a broad meaning of competition in
§ 2(d). We recognize that it would be both inappropriate and unwise
to attempt to formulate an all-embracing rule applying the elusive
language of the section to every system of distribution a supplier
might devise for getting his product to the consumer. But, on the
concrete facts here presented, it is clear that the direct impact
of Meyer's receiving discriminatory promotional allowances is felt
by the disfavored retailers with whom Meyer competes in resales. We
cannot assume without a clear indication from Congress that § 2(d)
was intended to compel the supplier to pay the allowances to a
reseller further up the distributive chain who might or might not
pass them on to the level where the impact would be felt directly.
We conclude that the most reasonable construction of § 2(d) is one
which places on the supplier the responsibility for making
promotional allowances available to those resellers who compete
directly with the favored buyer.
Page 390 U. S. 358
The Commission argues here that the view we take of § 2(d) is
impracticable, because suppliers will not always find it feasible
to bypass their wholesalers and grant promotional allowances
directly to their numerous retail outlets. Our decision does not
necessitate such bypassing. We hold only that, when a supplier
gives allowances to a direct-buying retailer, he must also make
them available on comparable terms to those who buy his products
through wholesalers and compete with the direct buyer in resales.
Nothing we have said bars a supplier, consistently with other
provisions of the antitrust laws, from utilizing his wholesalers to
distribute payments or administer a promotional program, so long as
the supplier takes responsibility, under rules and guides
promulgated by the Commission for the regulation of such practices,
[
Footnote 24] for seeing
that the allowances are made available to all who compete in the
resale of his product.
The judgment of the Court of Appeals, insofar as it held that
the promotional allowances granted Meyer by Tri-Valley and Idaho
Canning did not violate § 2(d), is reversed. The case is remanded
to the Court of Appeals with directions to remand to the Commission
for further proceedings consistent with this opinion.
It is so ordered.
MR. JUSTICE MARSHALL took no part in the consideration or
decision of this case.
[
Footnote 1]
38 Stat. 730, as amended, 49 Stat. 1526, 1527, 15 U.S.C. §§
13(a), 13(d). Section 2(a) provides in pertinent part:
"[I]t 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 . . . 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: . . ."
Section 2(d) provides in full:
"[I]t shall be unlawful for any person engaged in commerce to
pay or contract for the payment of anything of value to or for the
benefit of a customer of such person in the course of such commerce
as compensation or in consideration for any services or facilities
furnished by or through such customer in connection with the
processing, handling, sale, or offering for sale of any products or
commodities manufactured, sold, or offered for sale by such person,
unless such payment or consideration is available on proportionally
equal terms to all other customers competing in the distribution of
such products or commodities."
[
Footnote 2]
See n 1,
supra.
[
Footnote 3]
The Commission and respondents filed separate petitions for
certiorari to review different rulings of the Court of Appeals.
Respondents contended (1) that the Commission had failed to show
that respondents' inducement of §§ 2(a) and 2(d) violations had
been knowing and (2) that the Commission's order prohibiting future
inducement of § 2(d) violations was too broad. The Commission's
petition raised the question
"[w]hether a supplier's granting to a retailer who buys directly
from it promotional allowances that are not made available to a
wholesaler who resells to retailers competing with the
direct-buying retailer violates Section 2(d) of the Robinson-Patman
Act."
The Commission also presented an additional question which it
sought to reserve only if respondents' petition were granted. We
denied respondents' petition, 386 U.S. 908 (1967), and specifically
limited our review on the Commission's petition to the issue of
statutory interpretation therein presented. 386 U.S. 907
(1967).
[
Footnote 4]
The Commission found that the total of $25,200 received by Meyer
from 72 participating suppliers in each of the years 1956 and 1957
more than covered Meyer's cost of publishing, distributing, and
publicizing the coupon books in those years. The Commission
characterized are "clear profit" the $13,870 paid Meyer by consumer
purchasers of the books in 1957.
[
Footnote 5]
See n 1,
supra.
[
Footnote 6]
15 U.S.C. § 13(f):
"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 7]
38 Stat. 719, as amended, 66 Stat. 632, 15 U.S.C. § 45(a):
"(1) Unfair methods of competition in commerce, and unfair or
deceptive acts or practices in commerce, are hereby declared
unlawful."
"
* * * *"
"(6) The Commission is hereby empowered and directed to prevent
persons, partnerships, or corporations . . . from using unfair
methods of competition in commerce and unfair or deceptive acts or
practices in commerce."
[
Footnote 8]
63 F.T.C. at ___ (Commissioner Elman, concurring in part and
dissenting in part).
[
Footnote 9]
This case, in its present posture, does not present the question
whether the functional label used by a manufacturer or reseller
reflects his actual position in the distributive chain.
Compare
FTC v. Ruberoid Co., 343 U. S. 470,
343 U. S. 475
(1952);
cf. FTC v. Simplicity Pattern Co., 360 U. S.
55,
360 U. S. 62-63
(1959).
[
Footnote 10]
Automatic Canteen Co. v. FTC, 346 U. S.
61,
346 U. S. 65
(1953);
see F. Rowe, Price Discrimination Under the
Robinson-Patman Act 20 (1962).
[
Footnote 11]
S.Res. No. 224, 70th Cong., 1st Sess., 69 Cong.Rec. 7857
(1928).
[
Footnote 12]
Federal Trade Commission, Final Report on the Chain-Store
Investigation, S.Doc. No. 4, 74th Cong., 1st Sess., 63-65, 90-91,
96-97 (1935).
[
Footnote 13]
Id. at 57-65.
See also Hearings before the
Special House Committee on Investigation of American Retail
Federation, 74th Cong., 1st Sess. (1935).
[
Footnote 14]
See C. Austin, Price Discrimination and Related
Problems under the Robinson-Patman Act 6-11 (2d rev. ed.1959). In
presenting his bill to the House Judiciary Committee,
Representative Patman stated:
"I believe it is the opinion of everyone who has studied this
subject that the day of the independent merchant is gone unless
something is done and done quickly. He cannot possibly survive
under that system. So we have reached the crossroads; we must
either turn the food and grocery business of this . . . country
over to a few corporate chains, or we have got to pass laws that
will give the people who built this country in time of peace and
who saved it in time of war an opportunity to exist -- not to give
them any special rights, special privileges, or special benefits,
but just to deny their competitors the special benefits that they
are getting that they should not be permitted to have."
Hearings on H.R. 8442, 4995, and 5062 before the House Committee
on the Judiciary, 74th Cong., 1st Sess., 5-6 (1935).
[
Footnote 15]
See Federal Trade Commission, Final Report on the
Chain-Store Investigation,
supra, n 12, at 78-82.
[
Footnote 16]
Id. at 44-46, 61.
See also Hearings before the
Special House Committee on Investigation of American Retail
Federation, 74th Cong., 1st Sess., Vol. 3, No. 1, at 66-88
(1935).
[
Footnote 17]
Hearings on Bills to Amend the Clayton Act before a Subcommittee
of the House Committee on the Judiciary, 74th Cong., 2d Sess., 464
(1936) (Mr. Teegarden).
[
Footnote 18]
S.Rep. No. 1502, 74th Cong., 2d Sess., 7 (1936). The House
Judiciary Committee reported the provision favorably in identical
terms. H.R.Rep. No. 2287, 74th Cong., 2d Sess., 15-16 (1936).
[
Footnote 19]
The Commission's § 2(a) and § 2(d) rulings were both based on
findings that retailers in the Portland area who purchased through
Hudson House and Wadhams competed with Meyer in the resale of Idaho
Canning corn and Tri-Valley peaches. The Court of Appeals could not
have consistently set aside these findings with regard to the §
2(d) violations while upholding them with respect to § 2(a).
[
Footnote 20]
63 F.T.C. at ___.
[
Footnote 21]
S.Rep. No. 1502, 74th Cong., 2d Sess., 8 (1936); H.R.Rep. No.
2287, 74th Cong., 2d Sess., 16 (1936).
[
Footnote 22]
See n 14,
supra.
[
Footnote 23]
371 U.S. at
371 U. S.
515.
[
Footnote 24]
See 16 CFR §§ 1.55-1.56;
cf. "Guides for
Allowances and Services," 1 CCH Trade Reg. Rep. 11 3980, at
6073-6079.
MR. JUSTICE FORTAS, concurring.
I agree with the result in this case, and I join the Court's
opinion. The net of our decision, as I see it, is this. The statute
permits a supplier to make payment to retailers for services and
facilities only if such payment
Page 390 U. S. 359
or its equivalent is made available to all competing retailers
handling the supplier's product. If they choose to render the same
or equivalent service or furnish the same or equivalent facilities,
they are entitled to the same payment.
* I believe that
this result, obviously intended by the Congress, can best be
squared with the language of § 2(d) by the device of regarding the
wholesaler and his retail customer as a unit for purposes of that
section. The Court is clearly correct, in my view, in requiring
that the opportunity to participate be afforded to the competing
retailer, and not merely to the wholesaler. This is the plain
thrust and purpose of the section. The supplier may satisfy this
obligation by direct dealing with the competing retailer or by
arrangement with the wholesaler reasonably designed to transmit to
the retailer participation in the program if the retailer chooses
to accept.
* We need not here consider refinements of the problem --
e.g., the duty of the supplier to tailor his offer so that
it is within the practical capability of all competing retailers,
or, negatively, to avoid making an offer which does not permit fair
participation by all types of retailers of the product, as a
practical matter.
MR. JUSTICE HARLAN, dissenting.
I dissent because I believe the time has come for a change in
approach to Robinson-Patman Act cases that, as here, can only be
decided by a judicial
tour de force. No doubt, the broad
purpose of the Act was to protect small sellers from the advantages
their larger competitors can obtain through greater buying power.
In implementing this purpose, however, the statute imposes a
hodgepodge of confusing, [
Footnote
2/1] inconsistent, [
Footnote
2/2] and frequently
Page 390 U. S. 360
misdirected [
Footnote 2/3]
restrictions. In such a situation, it seems to me the wiser course
for this Court to hew as closely as possible to the wandering line
that the statute has drawn (with due deference to the expertise of
the Commission charged with enforcing the statute), and not to read
into the Act its own notion of how best to protect "little people"
from "big people."
In this case, certain suppliers made promotional allowances to
the company, a direct-buying retailer. The Act provides that, if
promotional allowances are made to one customer, they must also be
made, on a basis of proportional equality, to all other "customers
competing in the distribution" of the supplier's product. The
suppliers here involved did not make the promotional allowances
given to the company available to certain retailers who compete
with it but who buy not from the suppliers themselves, but from
wholesalers who, in turn, buy from the suppliers. The Court now
holds, for the first time, 32 years after the passage of the Act,
that, although these disfavored retailers are not literally
"customers" of the suppliers, the "broad goals" of the Act require
them to be treated as if they were.
Page 390 U. S. 361
Unfortunately, nothing in the Act and not one word of
legislative history the Court has found suggest that Congress meant
the word "customers" to mean "noncustomers who the Court thinks
need protection." The Federal Trade Commission refused to accept
the suggestion of one Commissioner that this unexpected nonliteral
reading of the word would best effectuate the Act's purposes, so
that Commission expertise cannot, in this instance, be brought to
bear in support of the Court's construction.
Furthermore, the failure of the Act to extend explicit
protection in the present situation cannot be dismissed as mere
legislative oversight. Compelling suppliers to make promotional
allowances available to retailers with whom they do not deal is no
simple matter. The supplier could deal through his wholesalers,
imposing restrictions on them to guarantee that an "allowance" is
actually passed through to retailers, only by running afoul of the
Sherman Act. [
Footnote 2/4] Nor
would it simplify matters to make the allowances directly available
to retailers: by hypothesis, the retailers in question are too
small to make direct dealing efficient, and, in any event, the
suppliers and retailers would constantly risk a Sherman Act charge,
by the wholesaler in the middle, that they were conspiring in
restraint of him. [
Footnote
2/5]
In addition, under the present circumstances, the very idea of
"proportional equality" is almost meaningless. The supplier is
asked to offer "equal" promotional allowances
Page 390 U. S. 362
to a direct-buying chain and a set of small retailers who buy
through wholesalers who presumably carry much of the promotion
load; the supplier risks treble damages if his guess as to what is
even-handed treatment turns out to be erroneous. Even if it were
desirable to force suppliers to submit every promotion to the FTC
for advance approval, the Commission's refusal to require equality
between customers and noncustomers here does not indicate that the
experts are sanguine about the possibility of working out a
rational definition of proportional equality under these
circumstances.
The supplier can, of course, resolutely refuse to enter into
promotional programs, a course of action that would effectively
avoid favoring large distributors. In doing so, however, he would
be abandoning one significant form of competition with his fellow
suppliers, and would risk the disfavor of retailers who might
prevail on differently situated and less timorous competitive
suppliers for assistance.
Congress, concerned as it was for small retailers, did not
explicitly impose the particular restriction on suppliers announced
today. Since, for all we know, the omission may have been
deliberate in light of practical considerations, I prefer to take
the statute as we find it. This course of action here and in
similarly opaque cases might at least encourage the Congress to
give this notoriously amorphous statute the thorough overhauling
that has long been due. [
Footnote
2/6] On this basis, I consider that this case should go for the
respondents.
Page 390 U. S. 363
[
Footnote 2/1]
See, e.g., F. Rowe, Price Discrimination Under the
Robinson-Patman Act 534; Stedman, Twenty-four Years of the
Robinson-Patman Act, 1960 Wis.L.Rev.197, 218.
[
Footnote 2/2]
See, e.g., Levi, The Robinson-Patman Act -- Is It in
the Public Interest?, 1 ABA Antitrust Section 60 (1952-1953). As
Professor Levi noted, published criticism of the Act is
unsportingly easy to find: "the literature on the Act has become
something of a contest of witticisms to relieve an otherwise dreary
picture."
Ibid. An example is Eine Kleine Juristische
Schlummergeschichte, 79 Harv.L.Rev. 921.
[
Footnote 2/3]
See, e.g., Shniderman, The Impact of the
Robinson-Patman Act on Pricing Flexibility, 57 Nw.U.L.Rev. 173;
Austern, Presumption and Percipience About Competitive Effect Under
Section 2 of the Clayton Act, 81 Harv.L.Rev. 773. The confusion is
all the more unfortunate in a field where actual conflicting
objectives are many: "competitive" purposes are often at odds with
"protective" purposes; the defense of traders at one level of
distribution may be inconsistent with the liberty of traders at
another level, and with the interests of consumers.
[
Footnote 2/4]
Under
Albrecht v. Herald Co., ante, p.
390 U. S. 145, it
would presumably be unlawful
per se for a supplier to
attempt to prevent his wholesalers from absorbing the allowance by
charging higher prices.
[
Footnote 2/5]
Under
Albrecht, supra, 390
U.S. 341fn2/4|>n. 4, it is difficult to see why an agreement
between supplier and retailer sufficient to insure that wholesalers
in the middle do not absorb promotional allowances would not
constitute a combination in restraint of these wholesalers.
[
Footnote 2/6]
See Friendly, The Gap in Lawmaking -- Judges Who Can't
and Legislators Who Won't, 63 Col.L.Rev. 787, 794:
"The tiniest fraction of the time spent by lawyers, legal
writers, administrators, and judges in an unsuccessful endeavor to
elucidate the obscurities of this statute would have sufficed to
put the house in order once the problems were revealed; but that
time has not been spent."
MR. JUSTICE STEWART, dissenting.
Section 2(d) of the Clayton Act, as amended by the
Robinson-Patman Act, makes it unlawful for a supplier to grant to a
customer a promotional allowance which is not available to "all
other customers competing in the distribution of such products or
commodities." The Federal Trade Commission held that the respondent
retailer had violated § 2(d) by inducing certain of its direct
suppliers to grant it promotional allowances which were not
available to wholesalers who sold the suppliers' products to
retailers competing with the respondent. [
Footnote 3/1] The Court of Appeals refused to enforce
this part of the Commission's order on the ground that the
wholesalers were not customers "competing" with the respondent. We
granted certiorari limited to a single question:
"Whether a supplier's granting to a retailer who buys directly
from it promotional allowances that are not made available to a
wholesaler who resells to retailers competing with the
direct-buying retailer violates Section 2(d) of the Robinson-Patman
Act."
386 U.S. 907.
The Court today agrees with the Court of Appeals' answer to this
question, and holds that wholesalers are not customers "competing"
with the respondent. But the Court nevertheless goes on to hold
that § 2(d) was violated upon a theory not argued here by either
party. The theory is that retailers who are, in fact, customers of
independent wholesalers are somehow also "customers" of the
suppliers of those wholesalers. The Commission has never suggested
that this case should turn on any such construction of the term
"customer." [
Footnote 3/2]
Cf.
SEC v. Chenery Corp., 318 U. S. 80.
Page 390 U. S. 364
Because the Court of Appeals was correct in rejecting the
Commission's construction of § 2(d), I would affirm its judgment.
But, at the very least, the case should be remanded in order to
give the respondent notice and an opportunity to defend against the
novel construction of § 2(d) under which the Court today finds the
respondent to be a violator of the law. Due process requires no
less.
Cf. Cole v. Arkansas, 333 U.
S. 196.
[
Footnote 3/1]
In this opinion, the term "respondent" refers to Fred Meyer,
Inc.
[
Footnote 3/2]
One Commissioner attempted in vain to persuade the Commission to
accept the theory which the Court today adopts:
"What made this practice illegal, as I see it, is that the
allowances were not also made available on proportionally equal
terms to Meyer's retail competitors. But that is not the
Commission's view of the law."
63 F.T.C. at ___ (Commissioner Elman, concurring in part and
dissenting in part).