Federal Trade Commission v. Broch
Federal Trade Commission v. Broch
Opinion of the Court
delivered the opinion of the Court.
■ Section 2 (c) of the Clayton Act, as amended by the Robinson-Patman Act,
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
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
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)
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 fagade 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.
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
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
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
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.
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.
The applicability of § 2 (e) 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
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.
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.
See Final Report on the Chain-Store Investigation, S. Doc. No. 4, 74th Cong., 1st Sess. (1935).
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.
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'n v. Simplicity Pattern Co., 360 U. S. 55, 69.
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.
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
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, or delivery resulting from the differing methods or quantities in which such commodities are . . . sold or delivered.”
The bill as reported from the Senate Committee excepted savings in brokerage from the cost proviso in § 2 (a). S. E,ep. 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.
The brokerage clause in the bill was originally directed only at outright commission payments by sellers to buyers’ agents. The
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), aff’d 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).
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, 150 F. 2d 607 (C. A. 4th Cir. 1945) (buyer’s broker buying and selling on his own behalf).
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.
Southgate Brokerage Co. v. Federal Trade Comm’n, supra, note 11. See also cases cited, note 10, supra.
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.
See Oliver Bros. v. Federal Trade Comm’n, 102 F. 2d 763, 770 (C. A. 4th Cir.).
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.
Several writers, including one of the coauthors 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-Pat-man 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.”
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.
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., 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.
Dissenting Opinion
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
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 ás a commission, brokerage, or other compensation to the buyer. 261 F. 2d 725. We granted certiorari, 360 U. S. 908.
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.”
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
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.
1 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.
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.
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-his principal without fear of violating § 2 (c) ,
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.”
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).
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.
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
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.
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.”
“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
“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.
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.
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.).
See Great Atlantic & Pacific Tea Co. v. Federal Trade Comm’n, 106 F. 2d 667 (C. A. 3d Cir.), and Southgate Brokerage Co. 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
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.
See note 4.
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*185 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 . . . .”
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.
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.
1 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.
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