Source: https://supreme.justia.com/cases/federal/us/355/396/
Timestamp: 2019-04-19 19:05:51+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 355 › FTC v. Standard Oil Co.
Federal Trade Commission v. Standard Oil Co.
Holding that § 2(b) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(b), affords a seller a complete defense to a charge of price discrimination if its lower price was "made in good faith to meet a lawful and equally low price of a competitor," this Court remanded this case to the Federal Trade Commission for findings as to whether respondent so acted in selling gasoline to four comparatively large "jobber" customers in Detroit at a lower price than it sold like gasoline to many comparatively small service station customers in the same area. Subsequently, without denying that respondent's lower prices were made to meet the equally low prices of its competitors, the Commission found that respondent's lower prices were made pursuant to a price system, rather than being "the result of departures from a nondiscriminatory price scale," and, therefore, were not made "in good faith," and it again ordered respondent to cease and desist from this practice. The Court of Appeals set aside the order on the ground that such a finding was not supported by the record.
Held: the case turns on a factual issue, decided by the Court of Appeals upon a fair assessment of the record, and its judgment is affirmed. Pp. 355 U. S. 397-404.
(a) Whether, on the record as a whole, there is substantial evidence to support agency findings is a question which Congress has placed in the keeping of the Court of Appeals, and this Court will intervene only when the standard appears to have been misapprehended or grossly misapplied. Universal Camera Corp. v. Labor Board, 340 U. S. 474. Pp. 355 U. S. 400-401.
(b) In determining that respondent's prices to these "jobbers" were reduced as a response to individual competitive situations, rather than pursuant to a pricing system, which is solely a question of fact, the Court of Appeals made a "fair assessment" of the record in this case. Pp. 355 U. S. 401-404.
that Standard's reduced prices were made pursuant to a price system, rather than being "the result of departures from a nondiscriminatory price scale." 49 F.T.C. 923, 954. The Court of Appeals found no basis in the record for such a finding, and vacated the order of the Commission, holding that Standard's "good faith' defense was firmly established." 233 F.2d 649, 655. In view of our former opinion and the importance of bringing an end to this protracted litigation, we granted certiorari. 352 U.S. 950 (1956). Having concluded that the case turns on a factual issue, decided by the Court of Appeals upon a fair assessment of the record, we affirm the decision below.
included among its findings; [Footnote 1] therefore, we limit our consideration of the pricing system contention to Standard alone.
"[t]he statement of the petition for certiorari that the judgment and opinion below might seriously hinder future administration of the law was grave and sufficiently probable to justify issuance of the writ,"
"we adhere to the usual rule of noninterference where conclusions of Circuit Courts of Appeals depend on appreciation of circumstances which admit of different interpretations."
Moreover, in Universal Camera Corp.
"is a question which Congress has placed in the keeping of the Courts of Appeals. This Court will intervene only in what ought to be the rare instance when the standard appears to have been misapprehended or grossly misapplied."
We do no more on the issue of insubstantiality than decide that the Court of Appeals has made a "fair assessment" of the record. [Footnote 6] That conclusion is strengthened by the fact that the finding made by the Court of Appeals accords with that of the trial examiner, two dissenting members of the Commission, and another panel of the Court of Appeals when the case was first before that court in 1949, all of them being agreed that the prices were reduced in good faith to meet offers of competitors.
Both parties acknowledge that discrimination pursuant to a price system would preclude a finding of "good faith." Federal Trade Comm'n v. A. E. Staley Mfg. Co., 324 U. S. 746 (1945); Federal Trade Comm'n v. Cement Institute, 333 U. S. 683 (1948); Federal Trade Comm'n v. National Lead Co., 352 U. S. 419 (1957). The sole question then is one of fact: were Standard's reduced prices to four "jobber" buyers -- Citrin-Kolb, Stikeman, Wayne, and Ned's -- made pursuant to a pricing system, rather than to meet individual competitive situations?
"There is no doubt that, under the Clayton Act, before its amendment by the Robinson-Patman Act, [such] evidence would have been material, and, if accepted, would have established a complete defense to the charge of unlawful discrimination."
340 U.S. at 340 U. S. 239-240. The proof should have been admitted; its absence can hardly be relied on by the Commission now as a ground for reversal. In any event, the findings that were made are sufficient for our disposition of the case.
"It may well be that [Standard] was convinced that, if it ceased granting tank-car prices to Citrin-Kolb, Wayne, and Stikeman and continued to refuse the tank-car price to Ned's Auto Supply Company, it would lose these accounts. It had substantial reasons for believing this to be the case, for all of these concerns, except Ned's Auto Supply Company, had already been recognized as entitled to the tank-car price under the commonly accepted standards of the industry, and Ned's had achieved a volume of distribution which brought it within the range where it was likely to be so recognized by a major oil company at any time."
Commission concedes that this first reduction occurred at a time when Ned's did not meet the criteria normally insisted upon by Standard before giving any reduction. Two years later, after a still further period of haggling [Footnote 9] and another Ned's ultimatum, Standard gave a second reduction of still another cent.
In determining that Standard's prices to these four "jobbers" were reduced as a response to individual competitive situations, rather than pursuant to a pricing system, the Court of Appeals considered the factors just mentioned, all of which weigh heavily against the Commission's position. The Commission's own findings thus afford ample witness that a "fair assessment" of the record has been made. Standard's use here of two prices, the lower of which could be obtained under the spur of threats to switch to pirating competitors, is a competitive deterrent far short of the discriminatory pricing of Staley, Cement, and National Lead, supra, and one which we believe within the sanction of § 2(b) of the Robinson-Patman Act.
The Commission admits that not all of the major suppliers were using the asserted dual price system, stating in its brief that Standard's two largest competitors in the Detroit area, Socony-Vacuum and Sun Oil Company, sold only at the higher tank-wagon price. The Commission findings reveal that those suppliers who did offer a tank-car price to the Standard customers in question were not offering a uniform price: both Shell and the Texas Company, for example, made offers of two cents per gallon off the tank-wagon price, as contrasted with Standard's one and one-half cent reduction.
The particular tag "jobbers" is of no significance here in the light of our affirmance of the Court of Appeals' conclusion that the reductions in price complained of were not made pursuant to a pricing system. Standard's use of the word, while not an accurate description of the economic function performed by the four purchasers, is as consistent with a desire to placate customers to whom Standard was not forced by lower offers to give a reduced price as it would be with any asserted reduction of prices pursuant to a pricing system.
". . . [W]e are unable to discern any basis for the conclusion that petitioner's prices 'were not the result of departures from a nondiscriminatory price scale.' The record affirmatively demonstrates to the contrary. Petitioner sold invariably at its uniform tank-wagon price, except when at different times it reduced its price to meet competitive offers in order to retain a customer."
"[I]n the instant situation, there is no finding, no contention, and not even a suspicion, but that the competing prices which petitioner met were lawful."
233 F.2d at 654. The Commission admits that it "did not actually adjudicate the legality of the competing prices which Standard allegedly met. . . ." In the manner of a casual aside, the Commission belatedly suggests now that the competitors' prices were unlawful, since they were similar to Standard's reductions, and the latter were unlawful because made pursuant to a pricing system. If this be thought sufficient to raise the question, the foundation of the Commission's logic is destroyed by our affirmance of the finding that Standard's reductions were not made pursuant to any price system.
Our disposition eliminates the necessity of considering this last point. Nor need we consider the Commission's claim that the Court of Appeals held the question involved here to be one of law. An examination of the court's statement, 233 F.2d at 651, indicates it had reference to the broader issue of Standard's "good faith" under § 2(b).
Labor Board v. Pittsburgh S.S. Co., 340 U. S. 498, 340 U. S. 502-503 (1951); see also Labor Board v. American National Ins. Co., 343 U. S. 395, 343 U. S. 409-410 (1952). Those cases cannot be distinguished from the present one on the basis of the statutes involved. Compare National Labor Relations Act, § 10(e), 61 Stat. 147, 29 U.S.C. § 160(e), with Federal Trade Commission Act, § 5(c) and (d), 52 Stat. 112-113, 15 U.S.C. § 45(c)(d). In Universal Camera, supra, the Court indicated that the review standard established in that case would apply to all instances of court review of agency decisions. 340 U.S. at 340 U. S. 488-490.
The Commission brief also claims that reduction pursuant to a pricing system was admitted in the 1940 answer filed by Standard. That portion of the answer referred to, however, was concerned with establishing an alternative and altogether different defense, namely, cost justification on the basis of functional customer classification. Such defense could be argued even if the reductions were held made pursuant to a pricing method, and therefore is consistent with the claim of good faith meeting of competition.
The Commission places great importance on the fact that only one of these offers was a standing offer. This is not a situation involving only one or two competitive raids, however; continuation of reductions once granted is warranted by § 2(b) when competitors' reduced price offers are recurring again and again in a cutthroat market.
the findings indicate that similar haggling over an extended period of time occurred before each of the other "jobbers" obtained a reduced price. The great time consumed in the haggling process tends to negate any idea that the participants were only deciding whether a given purchaser met Standard's four well-defined "jobber" criteria -- annual volume of one to two million gallons, own delivery facilities, bulk storage capable of taking tank-car delivery, and responsible credit rating.
"That nothing [herein] contained shall prevent a seller rebutting the prima facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor."
First. Standard admitted that it gave reduced prices to some retailers and refused those reduced prices to other retailers. Before granting these retailers the reduced prices, Standard classified them as "jobbers." Standard's definition of a "jobber" took into account the volume of sales of the "jobber," his bulk storage facilities, his delivery equipment, and his credit rating. If Standard's tests were met, the "retailer" became a "jobber" even though he continued to sell at retail. Moreover, Standard's test of who was a "jobber" did not take into account the cost to Standard of making these sales. So Standard's definition of "jobber" was arbitrary, both as respects the matter of costs and the matter of function. It comes down to this: a big retailer gets one price; a small retailer gets another price. And this occurs at the ipse dixit of Standard, not because the cost of serving the big retailer is less, nor because the big retailer, as respects the sales in question, performs a function different from any other retailer.
"What are the objectives of this bill? Mr. Chairman, there has grown up in this country a policy in business that a few rich, powerful organizations, by reason of their size and their ability to coerce and intimidate manufacturers, have forced those manufacturers to give them their goods at a lower price than they give to the independent merchants under the same and similar circumstance and for the same quantities of goods. It that right or wrong? It is wrong. We are attempting to stop it, recognizing the right of the manufacturer to have a different price for a different quantity where there is a difference in the cost of manufacture."
Second. It is argued, however, that the discrimination in favor of the big retailers and against the small ones is justified on the ground that Standard did no more than meet competition.
To repeat, Standard has given lower prices to some retailers than to others by labeling the favored retailers as "jobbers," when in fact they are not "jobbers." It seems impossible to justify the statutory burden of showing "good faith" by reliance upon such a plainly deceptive contrivance as that.
seller's otherwise unlawful price falls within the protection of § 2(b). But where, as here, a seller establishes a discriminatory pricing system, this system does not acquire the protection of § 2(b) simply because, in fact, use of the system holds a customer against a competitive offer. In other words, a discriminatory pricing system which in fact meets competition is not a good faith meeting of competition within the meaning of the Act. The effectiveness of the system does not demonstrate the good faith of its initiator.
Third. The mere fact that a competitor offered the lower price does not mean that Standard can lawfully meet it. Standard's system of price discrimination, shown not to be in "good faith," cannot be justified by showing that competitors were using the same system.
"This startling conclusion is admissible only upon the assumption that the statute permits a seller to maintain an otherwise unlawful system of discriminatory prices, merely because he had adopted it in its entirety, as a means of securing the benefits of a like unlawful system maintained by his competitors."
Federal Trade Comm'n v. A. E. Staley Mfg. Co., supra, at 324 U. S. 753. See also Federal Trade Comm'n v. Cement Institute, supra, at 333 U. S. 725.
"Congress meant to permit the natural consequences to follow the seller's action in meeting in good faith a lawful and equally low price of its competitor."
as a competitor can be shown to have violated it first, nor so long as that competition cannot be met without the use of oppressive discriminations in violation of the obvious intent of the bill."
"To illustrate: the House committee hearings showed a discrimination of 15 cents a box granted by Colgate-Palmolive-Peet Co. on sales of soap to the A. & P. chain. Upon a complaint and hearing before the Federal Trade Commission, this proviso would permit the Colgate Co. to show in rebuttal evidence, if such were the fact, an equally low price made by a local soap manufacturer in Des Moines, Iowa, to A. & P.'s retail outlets in that city; but this would not exonerate it from a discrimination granted to A. & P. everywhere, if otherwise in violation of the bill."
"But the committee hearings show a similar discount of 15 cents a case granted by Procter & Gamble to the same chain. If this proviso were construed to permit the showing of a competing offer as an absolute bar to liability for discrimination, then it would nullify the act entirely at the very inception of its enforcement, for, in nearly every case, mass buyers receive similar discriminations from competing sellers of the same product. One violation of law cannot be permitted to justify another. As in any case of self-defense, while the attack against which the defense is claimed may be shown in evidence, its competency as a bar depends also upon whether it was a legal or illegal attack. A discrimination in violation of this bill is, in practical effect, a commercial bribe to lure the business of the favored customer away from the competitor, and, if one bribe were permitted to justify another, the bill would be futile to achieve its plainly intended purposes."
(b) that it was in good faith meeting the lawful offer of a competitor, rather than merely matching a predatory price system, or meeting a competitor's "pirating" offers, to use the Court's word, with a "pirating" system of its own.
I would reverse this judgment and direct enforcement of the Commission's order.
"Respondent alleges that its general policy and practice of bona fidely selecting and classifying gasoline customers as wholesale or jobber customers, as distinguished from retail resellers, is as follows:"
"That such wholesale or jobber customer so classified shall have adequate bulk storage of his own; that he be equipped to receive bulk deliveries by tank car or truck train into such storage; that he have adequate distribution and delivery facilities; that he make tank car purchases in substantial volume, and do a continuing substantial volume of business as a bona fide gasoline dealer maintaining and operating an established gasoline business; that he have satisfactory credit rating; that he maintain a sufficient personnel and all requisite facilities and equipment to adequately operate his business, service his customers, and perform his functions as a wholesaler or jobber, and assume the hazard and expense of fully operating his own business."
"Respondent alleges that each of the four customers named in Paragraph Three of the Complaint fully, fairly, and reasonably falls within not only the requirements set forth in Paragraph 17 above, but within all fair, reasonable, usual and proper requirements for classification as a wholesaler or jobber, and that each maintains its own adequate bulk storage, delivery tank trucks, salesmen, and operating personnel; buys in substantial tank car or truck train lots. . . ."
"He must have equipment; he must have equipped himself with bulk storage, and, by bulk storage, I mean sufficient storage so that he can take care of tank car quantities of gasoline; he should have a volume of business amounting to about 1,000,000 to 2,000,000 gallons per year; his credit responsibility and so forth must be satisfactory; he should have an established business."
Also, with one exception for a short period, the favored "jobbers" always received the same price.
"In selecting the customers or prospective customers to whom [Standard] will grant the tank-car price on gasoline, the respondent's criterion is now, and for many years has been, that the customer or prospective customer make annual purchases of not less than from one to two million gallons of gasoline have storage facilities sufficient to accept delivery in tank-car quantities, and have a credit standing assuring payment for large volume purchases. This is the same criterion which for many years has also been applied by the respondent's major competitors, and, under it, any question of the distributive function performed by the purchaser, that is, whether the purchaser is a retail dealer selling to the public or a wholesaler selling to retail dealers, is wholly immaterial."

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