# Federal Trade Commission v. Morton Salt Company/Dissent Jackson

* Court Documents
* Case Syllabus
* Opinion of the Court
* Dissenting Opinion Jackson
United States Supreme Court
334 U.S. 37
Federal Trade Commission v. Morton Salt Company
Argued: March 10, 1948. --- Decided: May 3, 1948
Mr. Justice JACKSON, with whom Mr. Justice FRANKFURTER joins, dissenting in part.
While I agree with much of the Court's opinion, I cannot accept its most significant feature, which is a new interpretation of the Robinson-Patman Act that will sanction prohibition of any discounts 'if there is a reasonable possibility that they 'may' have the effect' to wit: to lessen, injure, destroy or prevent competition. (Emphasis supplied.) I think the law as written by the Congress and as always interpreted by this Court requires that the record show a reasonable probability of that effect. The difference, as every lawyer knows, is not unimportant and in many cases would be decisive.
The law rarely authorizes judgments on proof of mere possibilities. After careful consideration this Court has, at least three times and as late as 1945, refused to interpret these laws as doing so. In 1922, in Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346, at page 356, 42 S.Ct. 360, 362, 66 L.Ed. 653, a unanimous Court, construing like language in § 3 of the Clayton Act, said: 'But we do not think that the purpose in using the word 'may' was to prohibit the mere possibility of the consequences described. It was intended to prevent such agreements as would under the circumstances disclosed probably lessen competition, or create an actual tendency to monopoly.'
In 1930, in International Shoe Company v. Federal Trade Commission, 280 U.S. 291, at page 298, 50 S.Ct. 89, at page 91, 74 L.Ed. 431, the Court said with respect to identical language in § 7 of the Clayton Act, 15 U.S.C.A. § 18: '* * * the act deals only with such acquisitions as probably will result in lessening competition to a substantial degree, Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346, 357, 42 S.Ct. 360, (362,) 66 L.Ed. 653 * * *.' And Mr. Justice Stone wrote for the dissenting justices (280 U.S. at page 306, 50 S.Ct. at page 94): 'Nor am I able to say that the McElwain Company * * * was then in such financial straits as to preclude the reasonable inference by the Commission that its business * * * would probably continue to compete with that of petitioner. See Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346, 356, 357, 42 S.Ct. 360, (362,) 66 L.Ed. 653.'
With these interpretations on our books the Robinson-Patman Act was passed.
When the latter Act came before this Court in 1945, this same question was carefully considered and Chief Justice Stone, with the concurrence of all but two members of the Court and with no disagreement noted on this point, wrote: 'It is to be observed that § 2(a) does not require a finding that the discriminations in price have in fact had an adverse effect on competition. The statute is designed to reach such discriminations 'in their incipiency,' before the harm to competition is effected. It is enough that they 'may' have the prescribed effect. Cf. Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346, 356-357, 42 S.Ct. 360, 362, 66 L.Ed. 653. But as was held in the Standard Fashion case, supra, with respect to the like provisions of § 3 of the Clayton Act, * * * prohibiting tying clause agreements, the effect of which 'may be substantially to lessen competition,' the use of the word 'may' was not to prohibit discriminations having 'the mere possibility' of those consequences, but to reach those which would probably have the defined effect on competition.' Corn Products Refining Company v. Federal Trade Commission, 324 U.S. 726, 738, 65 S.Ct. 961, 967, 89 L.Ed. 1320.
It is true that later (324 U.S. at page 742, 65 S.Ct. at page 969) the opinion uses the language as to possibility of injury now quoted in part by the Court as the holding of that case. But the phrase appears in such form and context and is so irreconcilable with the earlier careful and complete statement, set out above, that the inconsistency must appear to a fair reader as one of those inadvertencies into which the most careful judges sometimes fall. It is the only authority for making a thrice-rejected rule of interpretation a prevailing one. I know of no other instance in which this Court has ever held that administrative orders applying drastic regulation of business practices may hand on so slender a thread of inference.
The Court uses overtones of hostility to all quantity discounts, which I do not find in the Act, but they are translated into a rule which is fatal to any discount the Commission sees fit to attack. To say it is the law that the Commission may strike down any discount 'upon the reasonable possibility that different prices for like goods to competing purchasers may substantially injure competition,' coupled with the almost absolute subservience of judicial judgment to administrative experience, cf. Securities and Exchange Commission v. Chenery Corp., 332 U.S. 194, 67 S.Ct. 1575, means that judicial review is a word of promise to the ear to be broken to the hope. The law of this case, in a nutshell, is that no quantity discount is valid if the Commission chooses to say it is not. That is not the law which Congress enacted and which this Court has uniformly stated until today.
The Robinson-Patman Act itself, insofar as it relates to quantity discounts, seems to me, on its face and in light of its history, to strive for two results, both of which should be kept in mind when interpreting it.
On the one hand, it recognizes that the quantity discount may be utilized arbitrarily and without justification in savings effected by quantity sales, to give a discriminatory advantage to large buyers over small ones. This evil it would prohibit. On the other hand, it recognizes that a business practice so old and general is not without some basis in reason, that much that we call our standard of living is due to the wide availability of low-priced goods made possible by mass production and quantity distribution, and hence that whatever economies result from quantity transactions may, and indeed should, be passed down the line to the consumer. I think the Court's disposition of this case pretty much sanctions an obliteration of the difference between discounts which the Act would foster and those it would condemn.
It will illustrate my point to discuss only two of the discounts involved-two which the Commission and the Court lump together and treat exactly alike, but which to me require under the facts of this case quite different inferences as to their effect on competition.
In addition to a general ten-cent per case carload lot discount, there is what we may call a quota discount, by which customers who purchase 5,000 or more cases in a twelve-month period get a further rebate of 10 cents per case, while those who purchase 50,000 or more cases in such periods get an additional 5 cents per case. The application of this schedule to distribution of the table salt involved is substantially illustrated by one of the Company's exhibits, from which we find:
It thus appears that out of approximately 4,000 customers only 54 receive either of these two quota discounts in practice, and the larger one is available to only four or five major chain store organizations. The quota discounts allowed a customer are not related to any apparent difference in handling costs but are based solely on the volume of his purchases, which in turn depends largely on the volume of his sales, and these in turn are surely influenced by his lowered costs which he can reflect in his retail prices.
I agree that these facts warrant a prima facie inference of discrimination and sustain a finding of discrimination unless the Company, which best knows why and how these discounts are arrived at and which possesses all the data as to costs, comes forward with a justification. I agree, too, that the results of this system on respondent's customer list is enough to warrant the inference that the effects 'may be substantially to lessen competition or tend to create a monopoly.'
Even applying the stricter test of probability, I think the inference of adverse effect on competition is warranted by the facts as to the quota discounts. It is not merely probable but I think it is almost inevitable that the further ten-cent or fifteen-cent per case differential in net price of salt between the large number of small merchants and the small number of very large merchants, accelerates the trend of the former towards extinction and of the latter towards monopoly.
However, a very different problem is presented by the differential of 10 cents per case when delivered in carload lots. This carload price applies to various small purchasers who pool their orders to make a carload shipment and to all who pick up their orders, no matter how small, at the company warehouses which are maintained in ten cities. The evidence is that less than 1/10 of 1% of the respondent's total salt business fail to get the benefit of this carload-lot discount.
It does not seem to me that one can fairly draw the inference that competition probably is affected by the carload-lot discount. Indeed, the discount is so small in proportion to price, salt is so small an item in wholesale or retail business and in the consumer's budget that I should think it farfetched even to find it reasonably possible that competition would be substantially affected. Hence, the discount, whether more or less than the exact savings in handling, would not fall under condemnation of the statute. The incidence of this discount on customers is not arbitrarily determined by the volume of their business but depends upon an obvious difference in handling and delivery costs.
The Commission has forbidden respondent to continue this carload-lot differential. The Commission has no power to prescribe prices, so that it can order only that the differential be eliminated. Unless competitive conditions make it impossible, the respondent's self-interest would dictate that it abolish the discount and maintain the higher base price, rather than make the discount universally applicable. The result would be to raise the price of salt 10 cents per case to 99.9% of respondent's customers because 1/10 of 1% were not in a position to accept carload shipments. This is a quite different effect than the elimination of the quota discount.
It seems to me that a discount which gives a lowered cost to so large a proportion of respondent's customers and is withheld only from those whose conditions of delivery obviously impose greater handling costs, does not permit the same inferences of effect on competition as the quota discounts which reduce costs to the few only and that on a basis which ultimately is their size.
The two types of discount involved here seem to me to fall under different purposes of the Act and to require different conclusions of fact as to effect on competition. Accordingly, I should sustain the court below insofar as it sets aside the cease and desist order as to carload-lot discounts.

## Notes

* ↑ The full text of the later reference, quoted in part by the Court, is: 'As we have said, the statute does not require that the discriminations must in fact have harmed competition, but only that there is a reasonable possibility that they 'may' have such an effect. We think that it was permissible for the Commission to infer that these discriminatory allowances were a substantial threat to competition.'
It seems obvious that the Court's 'as we have said,' refers to the earlier statement that the test is 'probability' which is quoted in full above, particularly in the absence of any other citation or reference.
This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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