Earl Warren: Number 173, United States, Appellant, versus National Dairy Products Corporation et al. Mr. Solicitor General.
Archibald Cox: Mr. Chief Justice, this case is here on a direct appeal under the Criminal Appeals Act from the judgment of the District Court to the Western District of Missouri dismissing in its seven counts of an indictment on the ground that Section 3 of the Robinson-Patman Act is so vague as to be unconstitutional. The provisions of Section 3 are set forth most conveniently on page 2 of our brief. The relevant portions are the first two lines and then the last three lines in that big paragraph. It shall be unlawful for any person engaged in commerce, in the course of such commerce, to sell or contract to sell goods at reasonably low prices for the purpose of destroying competition or eliminating a competitor. The indictment which was based partly on that statute and partly on the Sherman Act charged National Dairy's one of its officers with a number of monopolistic activities in violation of the Sherman Act and of the Robinson-Patman Act. National Dairy is the world's largest dairy concern. It has assets of something over 555 million and gross annual sales of over a billion and a half dollars. To conciliate under the Sherman Act, charged a continuing conspiracy to restrain train by fixing prices, by excluding competitors from the market and by fixing differentials on the prices for sales of various kind of milk, that is milk in containers as oppose to milk in bottles, milk in stores as imposed to home deliveries. Those counts aren't before us, but where a part of the indictment and part of the general background. The seven counts under the Robinson-Patman Act with which we are immediately concerned are exemplified by Count 2 on page 9 of the record. The offense charged leaving out the introductory allegations is set forth in paragraphs 22 and 23 on page 9. They alleged first in the general words of the statute that National sold milk to its distributor in the Paola-Osawatomie, Kansas market at unreasonably low prices for the purpose of destroying competition in the Paola-Osawatomie Kansas market in violation of Section 3 of the Robinson-Patman Act. That paragraph 2 goes on and particularizes the event by setting forth the facts of which it consisted. Pursuant to an effect -- an effectuation of the offense charged from paragraph 22, National utilized the advantages it posses by reason of the fact that it operates in a great many different geographical localities. In order to finance and subsidise the price war against small dairies selling milk in competition with it -- its distributor in the Paola-Osawatomie, Kansas market, by intentionally selling its milk to its distributor market at prices below National's cost. The latter paragraph of course limits the general charge adjust, as bill of particulars with limited indictment and it framed in the general terms of the statute. If the Government fails to prove sales below cost then of course at the trial, the respondent must be acquitted. So that we deal here not with the bear words of the statute as applied to abstract hypothetical situations that with the application of the statute to sell at prices below the seller's own cost made for the purpose of destroying competition. The District Court granted a motion to dismiss upon the ground that the relevant portions of Section 3 of the Robinson-Patman Act were so vague and indefinite that they violate the constitutional provisions relating to due process. The judge delivered no opinion. His few oral remarks simply state that conclusion. A contrary decision I may say was rendered by Judge Alger Fee in F & A Ice Cream Company against Arden Farms, the citation appears in our brief and that I believe is the only other reported case of the subject. The essence of this case, as we said, is very simple indeed and can be put in very few words. Laying the statute entirely aside for the moment, let's think of this simply as a business proposition. Suppose that this vast concern named a manager for the Kansas City area. And later, the officers in reviewing prices observed that he was selling milk and other milk product at prices below the cost of production. I suggest that the officers of the concern would have no difficulty in concluding just as a business proposition that those prices were unreasonably low and that unless the manager could point to some pretty specific market condition, or business exigency that explain this that they would say that prices were unreasonably low. Now, let's suppose he replied, “Well, unreasonably low, that's an awfully vague term, that's terribly, terribly vague. How can you tell that these prices are unreasonably low?” If that was his only answer, I suggest that National would still soon be looking for another Kansas City manager and that the manager would soon be looking for another job. All that this statute does, now coming to the legal question, is to judge National by the same terms that it would judge its manager in the Kansas City area or the Chicago area or anywhere else. To put the specific illustration in general words, we say that the critical question under this statute would be whether the seller fix the price in which he sell the good so low with the specific intention of destroying competition or eliminating a competitor that the price has no rational foundation in the seller's cost, or in market conditions, or in any other business exigencies of facing the seller of a kind of a businessman without predatory intent would consider relevant in fixing his prices.
Potter Stewart: He -- the benchmark is the seller's cost the -- this -- this seller's cost --
Archibald Cox: The benchmark the -- I would say --
Potter Stewart: (Voice Overlap) cost or not industry cost, is that it?
Archibald Cox: Correct. I'll explain the reason as I go along. But I would say that the point of view, if I may put it in those terms, because we tackle the point of view in determining negligence is from the standpoint of the Act. So the point of view here, I think, is from the standpoint of the seller, and that's one of the things that narrows the range of this term reasonable. It's the seller's point of view and the seller's own cost and the standard would be that of a reasonable businessman in the position of the seller. Of course, it's also necessary to have the predatory intention is just -- not just a matter of the cost level alone. The Government to succeed would have to prove that there was a specific intent to destroy competition or eliminate a competitor. I don't want to leave out that element which I think confuses the whole statute. In --
Speaker: (Inaudible)
Archibald Cox: Correct. The -- going on in more detail, the constitutional requirement of definiteness in criminal statute, serves two familiar purposes. First, it insures that citizens will have an adequate opportunity to know what conduct is forbidden before they are charged with crime. And second, it requires Congress or the legislature in the case of the state to resolve the questions of policy and provide the court's juries with adequate rules by which they can judge on whether one is guilty or innocent. Now, both elements are plainly met in the present case. Surely, no businessman reading Section 3 could have any doubt about whether the prescription of sales at unreasonably low prices for the purpose of destroying competition or eliminating a competitor, forbidding to sell goods at prices below his own cost for the purpose of destroying competition or eliminating a competitor. Here, as in so many other statutes, the requirement of a specific evil intention eliminates any danger that one would be convicted simply because the jury or judge thought that the prices were too low. One who has a purpose so at war without historic antitrust policy, certainly cannot claim surprise innocence if the Government later proceeds against him for violating Section 3. In this respect, I suggest the case is exactly like United State against Regan where the Court held that the term reasonable compensation in making deductions from the -- from one's gross income for income tax purposes was not too vague because the statute required a proof of a specific intent to defeat or evade the payment of the tax. And similarly in Hygrade Provision Company against Sherman where the language might otherwise have been too vague and uncertain, the constitutionality of the statute was saved by the fact that there was required proof of a specific intent to defraud. And here we think to repeat that the requirement of proof of a specific intent to eliminate a competitor or to destroy competition.
Felix Frankfurter: Suppose -- suppose the statute, instead of being in its present term left out at unreasonably low prices, simply made it a crime to sell goods at a price for the purpose of destroying competition -- at any price for the purpose of destroying competition. What I have in mind, suppose a concern comes into a market in which it hasn't been theretofore and sells it as a -- what might be called an unreasonably high price in order to make people feel that the true value, if you want this kind of goods, you got to pay a price for it and that people are now selling it at a much lower price are really as it were skimping or cheating you or otherwise giving you less -- giving you meretricious commodity, would that be alright?
Archibald Cox: Well, that -- I'm inclined to think that it would, but I think it's a closer case than this one because it seems to me, what was done here was that instead of simply saying that predatory pricing should be unlawful. The Congress put in an additional safeguard as I see it because it requires the Government -- it -- it avoids or certainly reduces if not avoids entirely, any possible confusion between fixing a price which attracts business to you and therefore away from competitor, and which might standing alone give rise to arguments about whether your purpose was to destroy competition or simply to do business. This statute by setting up another element that the price set must be unreasonably low, must be --
Felix Frankfurter: I take it as (Voice Overlap)
Archibald Cox: -- an abnormal price would make it harder for the Government to prove its case and avoid that possible dilemma.
Felix Frankfurter: I'll take it as a third reason against vagueness in criminal statute and that is that you shouldn't leave too much room for variance determination by juries throughout the country.
Archibald Cox: That would seem to be -- to be much the same as my second reason that I would --
Felix Frankfurter: Which is what?
Archibald Cox: That it was -- it is desirable to have it in order to provide a rule by which the finders of fact and the judge shall make their determination instead of simply leaving it to them to decide --
Felix Frankfurter: I take it --
Archibald Cox: -- what's undesirable.
Felix Frankfurter: My third suggestion is different. The vagueness maybe the juries wouldn't know what to do. But my third suggestion, my third reason against vagueness is that you'd have a jury in -- in Boston, make one -- have one standard in its head and the jury in Pittsburgh another standard.
Archibald Cox: Well, the standard which we think would be controlling here in each instance is the standard of the business community that the statute refers as so many statutes do to the standard of the people concerned in this line of activity.
Felix Frankfurter: It doesn't say so.
Archibald Cox: No. But reading -- reading the statute were denied in what it's seeking to achieve and in the light of its historic purposes. It seems to me that quite plainly is the direction in which it looks as I've indicated in answering Justice Stewart and the standard which it incorporates just as the income tax law incorporate such a standard in -- in dealing with deductions just as the California statute dealing with driving in an unreasonable rate of speed, incorporates the standard of the ordinary man driving a motor vehicle.
Felix Frankfurter: It all depends on how many --
Archibald Cox: And the shortest practicable route is the standard of the trucking industry and --
Felix Frankfurter: It all depends on how many variant factors are implied.
Archibald Cox: That's true but I suggest here that they are narrowed very, very considerably.
Speaker: How many?
Archibald Cox: And certainly as -- and certainly as applied to this case, there could be no doubt that a price less than cost with no explanation -- it could be explanations but a price less than cost, there's no explanation --
Felix Frankfurter: But if the --
Archibald Cox: -- is an unreasonably low price.
Felix Frankfurter: If the statute itself is vague and you resend this particular case, there's no trouble?
Archibald Cox: One must find the standard in the statute. But the possibility that some other hypothetical case might raise difficulties of interpretation is not one that should prevent the Court from applying it in the situation where from the standpoint of the defendant the meaning was clear and where in the terms of the court of jury applying it.
Felix Frankfurter: No, no hypothetically --
Archibald Cox: The meaning was sufficiently clear.
Felix Frankfurter: I don't think hypothetical harsh case, but the standards must be drawn from the terms of the statute -- and --
Archibald Cox: Well --
Felix Frankfurter: -- not be vindicated by the specific fact for the particular case.
Archibald Cox: Reading the statute in the light of its background and in the light of its subject ground even in the Cohen Grocery case. Mr. Chief Justice Taft clearly recognized that if the statute could be given meaning by reference to the practices of industry, or by particular industry, or could be drawn -- the meaning could be drawn out of the subject matter then that was -- it might make sufficient of what simply as a matter of etymology or an exercise -- academic exercise in cost counting was vague. All statutes must be read with reference to their background and purposes. Here, I think that if one looks at the background and -- before I go on, Mr. Justice Harlan have a question.
John M. Harlan II: I'm going to ask you. How many prosecutions did the Government brought under this statute?
Archibald Cox: There have been very, very few, very, very few.
John M. Harlan II: The reason I asked was because when I wrote an opinion some years ago in Nashville, I couldn't find that I ever used it.
Archibald Cox: There have been very -- there have been very, very few. There's a case brought against Safeway Stores where there's some dispute between the appellees and ourselves as to whether it was based partly on Section 3, but they certainly could be counted on the fingers in one hand.
John M. Harlan II: Have there been any convictions under it?
Archibald Cox: The -- there was a play of nolo in this case to which I refer. Both situations, not all Mr. Justice Harlan in which Section 3 might be invoked, a prosecution can also be founded on the Sherman Act and I think that -- plus the fact that this was noble and there are somewhat problems. I wouldn't deny that in the application of Section 3, has led the department not to use it widely. I would also doubt whether there were many instances in which one could find sales at prices below cost in circumstances quite as extreme as those charged in this indictment or as we expect to prove.
Felix Frankfurter: You speak -- you lay the emphasis on the fact that this was a vast organization. What's the relevance of that? If the statute had said in case of enterprises having a turnover of X hundred millions or $20,000,000, I could see that would be a hedging in. That would tell you some implications with it, namely that you have means of comparison.But this statute isn't so restricted is it?
Archibald Cox: Of course, the size of the company does not fix a limit on who can be prosecuted and who cannot be prosecuted. It's significant I think, however, as part of the background and one of the facts alleged in the indictment because it helps us look at what this statute is aiming to do. This is a statute which is directed at dealing within historic problem for many, many years, large concerns with sufficient assets to conduct such a campaign have found cutting prices for the purpose of eliminating competitors or teaching those who are unwilling to follow its price leadership a lesson so that they will adhere to its price leadership in -- in the future and effective way of eliminating competition. The history of the Standard Oil and Tobacco Trust was replete with instances of this kind. Now, to a considerable extent where you have a combination in restraint of trade or had monopolization under Section 2 of the Sherman Act, these problems were dealt with under -- under the Sherman Act. But the Sherman Act contains no specific provision directed at -- and its specific anti-competitive prac -- practices before that degree of monopoly or restraint had been achieved. Then came the Clayton Act which is Your Honor of course, the members attempted to particularize. And one of the things that it was directed at was on a discriminatory price cutting for the purpose of eliminating competition. This provision turned out to have -- to be inadequate in the eyes of Congress. And in 1936, the Robinson-Patman Act attempted to tighten. And again, to feel more specifically with this predatory price cutting, some of the provisions as the Court recognized in Moore against Mead's Fine Bread were drawn so as to prevent a big company like this, from using the profits that it made in interstate sales to finance local price wars, and they -- they designed to eliminate small businessmen. Discriminate not all the instances of this kind, fall under the rubric discrimination. For example, there are many markets dealt is typically one of them in which the price is so affected by local conditions that one could in fact sell at a lower price in a particular market and subsidize that as sales below cost in that market out of the profits he made and some others without it's being possible to prove discrimination. Or he might produce his price on a single product, adds the low cost as it's charged here and subsidize the loss by the profits he made on the other product. Those practices are just as predatory, just as anti-competitive and I submit just as easily identifiable as the predatory practices involving price discrimination. It's evident that this is what Congress was seeking to deal with. And that the -- the knowledge of the evil that it was seeking the remedy not only helps to identify the general area in which the statute falls but I suggest that it does fix the point of view, Mr. Justice Stewart, that it does make it plain that we come at this from the standpoint of the fact -- the problems facing the seller. Certainly, we don't as in -- might have been argued in the cases under the Labor Act, look at it from the standpoint of the prices -- of the situation facing the buyer. After all and accept as he may see through the eyes of others, no price from his standpoint is unreasonably low. I think it is also plain that we're not interested in some average cost because the theory of the antitrust laws of which this is apart is that the effect is to encourage a firm if it -- to reduce its prices and give the consumers the best buy for their money, even if this does hurt some marginal firm. It's one when -- one gets an artificially low price, a price which has no business justification and that price coupled with the predatory intent that the policy of the antitrust laws is violated because of the long run damage.
William O. Douglas: They sell it -- selling below cost would be just one illustration.
Archibald Cox: Yes.
William O. Douglas: Selling -- it might be selling below, it might be selling at cost, it might be selling --
Archibald Cox: It might even be selling somewhat above cost.
William O. Douglas: Above cost that -- at a -- at a marginal profit that is --
Archibald Cox: Is abnormal -- is so small that no business could long be surviving. Now, there may be instances where selling below cost would be justified. My contention stated more precisely is that sales below cost for this purpose without some business explanation are clearly unreasonably low. But the business explanation are readily identifiable to go back to my hypothetical case of the manager if he were able to show his employers that by selling it what was below his current cost, he was getting rid of a spoiled milk and -- which he otherwise would have to throw away, this would make the price reasonable. If he were showing that he had reason as Judge Merrill recognized in one of the private suits before the Carnation Milk case. If he were selling at a price which was below his current cost, but which he could show at a reasonably anticipated volume would then be -- would then yield him a reasonable profit and that he had reduced the price to raise his volume and spread his overhead cost over a larger number of units, that too in the eyes of a businessman and the position of the seller would make this reasonable. And we think it would make it reasonable here.
Felix Frankfurter: Mr Solicitor General, I like to -- I have it of disclosing my difficulty in this case -- and my difficulty in this case is a case to which you don't even refer your belief, Connally Commission against General Construction Company. I might say I was surprised at the time that sitting with -- that case was decided, but I shall think you have a good hurdle to get over in that case.
Archibald Cox: I'm not bringing our brief Your Honor. I must confess that --
Felix Frankfurter: Well, it seems to me the closest case that's involved in this case.
Archibald Cox: I --
Felix Frankfurter: It's in 269 U.S. 385.
Archibald Cox: In 5 -- I'm afraid I just can't comment on that.
Felix Frankfurter: Let me read you the statute which as I've said, I've indicated. I thought that was strange decision. There, imposed punishments upon contractors who pay their workmen less than (Voice Overlap).
Archibald Cox: Oh the reasonable --
Felix Frankfurter: The current production --
Archibald Cox: (Voice Overlap)growing wage in -- yes.
Felix Frankfurter: -- current on wages in the locality where --
Archibald Cox: Yes, I --
Felix Frankfurter: -- the rest had performed.
Archibald Cox: I'd -- I do remember the statute.
Felix Frankfurter: Not cited in the brief to my great surprise.
Archibald Cox: It's not cited -- it's not cited in either brief. And when I read it, I had doubt frankly whether the case was the one that would be followed today.
Felix Frankfurter: Well, but that's going (Voice Overlap)
Archibald Cox: But I think that --
Felix Frankfurter: -- I'm not referring to it, is it?
Archibald Cox: No, no. I do think that there is this that this is a question of which involves a knowledge of what are wages -- what are wages in the community. It may be much harder to identify the wage in a community that it is to identify the -- well, but this is often true with all difference Your Honor.
Felix Frankfurter: (Voice Overlap) wages in the locality.
Archibald Cox: Oh does it prevail, well -- just excuse me, I simply --
Felix Frankfurter: What is unreasonable below?
Archibald Cox: What is a -- the prevailing rate of wage does not put this in terms of anybody's point of view. Now, if you go in to the wages in the construction industry of the Philadelphia locality, you may find that for operating -- well operating engineers -- many classifications for carpenters that there are 10 different wage rates being paid by different concern which is the prevailing one. There may be -- this happens all the time. There may be 20% of the employers are paying carpenters $2.75.
Felix Frankfurter: Well, I should think you equate -- equate working function to working function -- in working function. In other words, the prevailing rate of wages of carpenters is one thing and particular kind of carpenters of any rate of wages of plumbers (Voice Overlap)
Archibald Cox: Oh no, no --
Felix Frankfurter: -- professor is another thing.
Archibald Cox: Excuse me, I took carpenters because this is not a trade in which they are divided in terms of skill. Carpenters for the most part are carpenters. And the same thing would be true of laborers or qualified electricians where you have a lot of small employer. You have -- under the devastation act. This is frequently a very difficult problem. And you have a lot of different prevailing wages. The coming of unions has of course tended to stabilize it at a particular rate. But here, it decides which is prevailing. The economist had never -- as a matter of theory been able to work this out.
Felix Frankfurter: Yes, I know but there's a statute which now -- what is it, the Miller Act?
Archibald Cox: The devastation act.
Felix Frankfurter: The Walsh-Healey Act -- the Walsh-Healey Act (Inaudible)
Archibald Cox: That is -- both of those provide -- both of those provide for a determination by an administrative authority.
Felix Frankfurter: Oh but if it can't be determined, how can he determine it.
Archibald Cox: I think (Voice Overlap) --
Felix Frankfurter: How can he better than a jury.
Archibald Cox: Well -- oh, I'm not seeking to defend the ruling in the Connally case. I'm suggesting --
Felix Frankfurter: You don't have to defend it but you have to meet it.
Archibald Cox: -- and I am trying to suggest that the problem of selecting which of perhaps half a dozen or eight different rates are paid in no case to as many as the majority of the employees is prevailing. It's quite different from deciding whether a sale at a price below the seller's own cost is unreasonably low, especially when it is coupled with the intent to destroy competition. I submit that the cases are readily distinguished book on the -- on the ground of practicalities of the kind of judgment called from. Might I say just one thing further that the -- in this case, the logical conclusion of the appellee's argument, it seems to me, is that the Congress is powerless to deal with this kind of predatory activity. Neither the appellee nor anyone else has suggested any formulation more precise than the one in the statute here. And this is the one which the Canadian parliament followed and others. I think that it is important to take into account therefore if to be any doubt what Mr. Justice Black said in the Petrillo case and that is that the Constitution does not raise impossible hurdles to legislation.
John M. Harlan II: Should we judge a statute on its face or is it supplied?
Archibald Cox: I think that the -- I think on its face has two different meanings which is important to distinguish here. I think ought to the extent that on its face, means that one must find the standard in the statute itself or in some business standard of the business community, the relevant community or that the statute incorporates, then it must be judged that way. On the other hand, I think the question is whether the statute is reasonably plain as applied to this defendant and the conduct in which he engaged and that the hypothetical cases about somebody else's conduct that somebody else might engage in are not before the Court.
John M. Harlan II: Well, all I was taking with you is this. Supposing this indictment as it might have simply charge the offense and the terms of the statute. And then the -- the defendants should answer a bill of particulars and what is now in the indictment has been supplied by way of bill of particulars.
Archibald Cox: Yes.
John M. Harlan II: Then how --
Archibald Cox: And then the Government would be bound to that and the court --
John M. Harlan II: Well then, would you judge the statute if you have the case up here in that posture, would you judge it in light of the bill of particulars or would you judge it extra bill of particulars?
Archibald Cox: I think you would judge it in the later bill of particulars. And I think this expressions that we determine the meaning of the statute on its face which are very common in the opinion means that the standard as applied -- that the standard must be found to the statute. That -- but standard as applied to something and I say that's the -- as applied to the case made in the indictment and that is the case named the indictment is exactly the one that Your Honors followed. It seems to me that this is essentially what was done by the Court in the Harris case, the one involving the Lobbying Act wherein some of its applications the Anti-Lobbying Act might have been unconstitutionally vague, limited to direct approaches to congressmen. It was held sufficiently to decide.
William O. Douglas: We don't -- notice in the -- in a footnote in the Nashville Milk case at the Department of Justice so far as we can ascertain -- as of that time, we never brought a criminal suit under 3.
Archibald Cox: There had been --
William O. Douglas: Is this the first one?
Archibald Cox: I don't think this is the first one, but it is very nearly the first.
Earl Warren: Mr. Chadwell.
John T. Chadwell: Mr. Chief Justice, may it please the Court. There is not a word in this statute which is before the Court or consideration about sale below cost. I think it well at the outset of my remarks to remind the Court of that fact. The statute provides against sales at unreasonably low prices. Those are the words of the statute. Now, we contend and of this urge in our brief that if the unreasonably low price provision of the statute is considered on its face in line with the question of Mr. Justice Harlan, it obviously is unconstitutional under a long line of decision starting with Cohen -- the Cohen Grocery case. The term unreasonably low price or the unreasonably high price or unreasonable price, the latter of which was held unconstitutional in the -- in the Cohen case is indefinite now as it was when those cases was -- were decided. The term unreasonably low price has no ascertainable meaning. It has no definition in law, in custom or in the business society which gives it any meaning whatsoever. Now the Court said that in the Cohen case. They repeated it in Cline against Frink Dairy Company. They referred to it again as a rule of law in the Connally case to which incidentally our brief refers four different times. The Solicitor General was in error in that case. We do rely in part on the Connally case as well as these other cases. And I strongly urge that upon the face of the statute and the decided cases of this Court, this statute is unconstitutional as the District Court held. Now as the Solicitor General said, “This is the first time the statute has been before this Court in the criminal case.” This is a criminal case. Mr. Wise, one of the defendants in this case, an individual defendant, was entitled to notice in the statute not for the first time in the indictment that doesn't satisfy the vagueness requirements of the Constitution. He was entitled to notice in the statute as to what he had to do to comply with the law. That is the Due Process Clause in the Fifth Amendment. That is the notice requirement in the Six Amendment and as this Court has said a number of times and as the Solicitor General virtually admits here today, he must find that standard and that definition in the statute. And if he gets it for the first time in the indictment, which is what the Solicitor General is arguing here today, the provisions of the Fifth Amendment and the Sixth Amendment are a sham in a delusion. As Mr. Justice Douglas said in the Cardiff case, he is entitled to it in the statute itself. Now, if the Court please, I say that not only is the unreasonably low price clause, unconstitutional or indefiniteness and vagueness as this Court had said, but it cannot be saved by the intent provision of the statute. If these were saved by the intent provision of the statute as the Solicitor General has argued, then you'll read the first requirement right out of the Act. The Act provides two elements of an offense. The first element of an offense is to sell at unreasonably low prices. Now, what standard is set up by that provision? I say there is no standard set up by that provision and so as the Court so held. Now, what does the Solicitor General argued? He argues oh well -- oh well, I'm not -- don't want to talk too much about the unreasonably low price clause. But there is an anticompetitive intent requirement in the statute. But this Court has held -- all seven justices held when the subject of intent was discussed in the -- in the Screws case. All seven justices are writing separate opinions in this case held that the element of definiteness required by the Fifth and Sixth Amendments cannot be supplied by intent. If so, as Mr. Justice Frankfurter indicated in his question to the Solicitor General, all you need to say would be “Any act done, any act done by a person with the intent our purpose of hindering or lessening competition would be sufficiently valid under the Fifth and Sixth Amendment,” and no court has ever held that. Now, what does the Government say, and I might before passing on to this next point, I want to make this observation that the Government apparently at the time this appeal was taken, thought that this case should be determined as it was in the lower court on the face of the statute and not through any limitation -- limitation in the indictment, for in the notice of appeal in this case after we want it in the lower court. The question stated by the Government to be presented by the appeal was whether or not the unreasonably low price provision of Section 3 was a violation of -- of the Fifth and Sixth Amendments to the Constitution. It was not until they filed their jurisdictional statement and briefed the subject that they tried to narrow the issue before this Court to the cost question. Now, let us discuss the cost question. The Solicitor General argues in effect. We don't have to defend this statute on its face. We don't have to defend the statute on the word that Congress chose to enact namely unreasonably low prices. We defend the statute on a ground that at least -- at least such language means sales below cost. At least, it prohibits sales below cost. Well now, in the first place, we deny that you can equate the term unreasonably low prices with the term sales below cost. There are many, many instances as in and aside the Solicitor General stated in his oral argument. There are many instances when no one could possibly say that a sale below cost could be predatory in any sense, could be unreasonable, it could be an unreasonably low price. Many instances as they admit in their brief such as sales of excess inventory, such as sales of merchandise is not going very well, all sorts of things of that kind. But there are many others of prices fixed in advance of the fact. You don't know what your cost are until the transaction is completed. Every cost and every accounting system in the land is based upon cost after the transactions have occurred. There's no one who knows in advance what his cost is going to be, why? It happens constantly with an efficient operation. It happens constantly with efficient operations that after a sale has been made, it is then determined for the first time that the sale was below cost. Let us assume that a business organization projects a certain volume over a certain period, and upon the basis of that project -- projection, they established a certain price, would it develops during the course of the -- of the period of sale that they were wrong and how much they were going to sell or and if their volume fell way below what they anticipated. Or that they were wrong in what their cost were going to be, because of efficiencies or inefficiencies that develop in the course of operation or manufacture. That sale turns out to be below cost. Could anyone say that that act was an unreasonable act? That that price was an unreasonable price? And the only way the Solicitor General suggests to this Court that you could save that situation is by the intent clause. And I say to this Court that you held over and over again that you can't save an Act by the intent clause where -- where it submits or -- or outlines or states any indefinite standard in the first place.
Felix Frankfurter: I thought we decided the contrary in Screws?
John T. Chadwell: Your Honor, I -- I recognize the -- the -- the force of Your Honor's comment but I said this, that in Screws, both in the opinion written by Mr. Justice Douglas and in the opinion written by Your Honor, in which seven -- in both of which seven justices joined, I think you will find and I can stop and read -- read the portions out. But they're cited in our brief. I think you will find that in both opinions, all seven justices agreed to the statement that I have just made that a -- an unreas -- that an indefinite standard or the lack of the -- of the standard cannot be supplied by intent. And Your Honor did distinguish a number of cases which have been cited to the contrary effect on the ground that the language used. There were makeweight -- it was makeweight language that the Court had held in already that there was a sufficiently definite standard and pointed out in addition that there was a predatory intent or criminal intent required. Why Your Honor, if -- if intent, if intent could supply a needed deficiency in an indefinite standard, the Cohen case wouldn't have been decided the way it was because that required willful intent to sell at unreasonable price. The Frink case would not have been decided the way it was, because it is also requiring sale at an -- with a wilful intent. The same thing was true in the -- in the Cramp case which the Court decided only last December as -- as an invalid statute, because of a failure to define the acts forbidden. And that was the case in which intent was specified, a wilful intent to violate the law, and that did not save that statute. I think that the Court -- the Supreme Court has made that very clear if the Court please and I do not think there is anything in Screws to the contrary. In fact, I contend as I have said that all seven justices in the two opinions to which I refer are recognized that fact as a rule of law.
John M. Harlan II: Why you say that the Solicitor General's argument that if this statute is struck down for vagueness it's in effect saying that Congress cannot legislate in this field?
John T. Chadwell: I say they can legislate in this field if they desire to do it, if the Court please, and I -- and I want to -- and I want to state this which the Solicitor General has ignored and which their brief ignores although we have covered the point at quite some length. 30 different states, 30 different states have adopted sales below cost statutes. Now, assuming that the Congress desired to legislate in the sales below cost field, they could easily say sales below cost. They wouldn't have to say unreasonably low pricing. The legislative history shows they didn't mean to say sales below cost. They didn't say sales below cost, but 30 different states of legislation in that field.Now, what have they done? They have prohibited sales below cost and they have defined what cost means. Now, these definitions vary, I must say that greatly between the various states. But there has been a standard of definition. They have state adjust -- just what -- just how cost should be computed. Now, the very fact that those statutes had varied greatly as between the various state is proved, it seems to us, that there is no ascertainable standard from the word cost itself. And that if you get by the point which I have strongly urged to the Court that you cannot equate unreasonably low prices and -- and sales below cost. If you get by that and say, “Well, we will interpret the statute as meaning sales below cost” then I say, “You've got no better standard than you have before.” The Solicitor says “Well, anybody knows he shouldn't -- shouldn't sell below his own cost, and certainly the statute at least means that.” Well, the indictment says that, but Congress didn't say that. The indictment or Congress either one, doesn't supply or indicate what cost means if we go to the literature and define what cost means, we find the cost being defined every which way and great disagreement on the subject according to the -- the authorities which we have cited in our brief, and this Court in the Automatic Canteen case recognized the illusory nature of the term and referred to it in connection with that case which was of course justification case under Section 2 (a) of the Robinson-Patman Act. Now, let us assume that the -- that the term unreasonably low prices should be considered to mean sales below the defendants cost -- the defendants cost. Let's narrow it that much. So, although the statute does not do so, no definition of cost does so. Mr. Justice Stewart asked the question, “Does cost mean the defendants cost or does it means average cost?” We will look to the statute in vain for an answer to that question because the statute doesn't even say cost. The Federal Trade Commission and the Department of Justice was called upon by the House Committee on Interstate and Foreign Commerce just in 1960, to advice with them concerning a bill pending before Congress which have been introduced by Representative Patman in an effort to define the term unreasonably low cost -- unreasonably low price which was in that bill, which would have given to the Federal Trade Commission the right to determine unreasonably low prices and a -- and the trouble damage plaintiff to sue for damages resulting from sales at unreasonably low prices. In effect, it was a bill to send aside the decision of the Court in the Nashville Milk case. And in that -- in that bill which was introduced by Representative Patman in 1960, there was an attempt made to define the term unreasonably low price and among other definitions in there was selling below cost and then the -- the sales below cost was defined. And it was defined in this way. It was defined to say, first it means, cost is defined in any state sales below cost statute which might be applicable in the State where they say it was made. Second, in the absence of such a statute, it should be defined as a sale at a price less than the cost of manufacturing, packaging and selling a commodity with the payment of such transportation cost as they're born for the producers and then they go on plus overhead and other cost of the vendor doing business. Well, the Department of Justice was called upon to comment upon this bill. And the Department said that it carries overall of the ambiguities and uncertainties of the unreasonably low price cost of Section 3. We quote this letter in our brief. And furthermore, that the -- that the definition is given, gives rise to a great many ambiguities and uncertainties and there will be great dispute over what this terms mean, which I urged to the Court is an admission by the Department of Justice itself that even if you try to define cost a little more than just saying cost and in the matter that was done in the Patman bill. That man of intelligence as stated the Connally case. Man of intelligence must guess as to its meaning and differs to -- as to its application. And since that is necessary, there's no standard for this -- within the meaning of the Fifth and Sixth Amendments. Now, I might say that we --
Hugo L. Black: Why is that not applicable to the --
John T. Chadwell: I beg -- beg your pardon?
Hugo L. Black: Why is that not applicable to the antitrust law as construed in the Standard Oil case?
John T. Chadwell: Well, Your Honor, it was decided in Nash of course, that the term unreasonably low -- or an unreasonable restraint of trade furnished a sufficient standard through the common law meaning of the term to satisfy the Fifth and Sixth Amendment and the -- and this Court, the Supreme Court in Cline against Frink Dairy distinguished the Nash case from the unreasonable profit case which was submitted to the Court there up on that ground. There's no doubt that words that have a general meaning of the common law such as restraint of trade or a general meaning through custom or through business -- business ethics as in the Regan case which the Solicitor General has referred to which the Court equated with fraud. There's no doubt that is sufficient standard --
Hugo L. Black: Does it have to have fraud?
John T. Chadwell: No, it doesn't have to have fraud Your Honor --
Hugo L. Black: What is an unreasonable restraint of trade?
John T. Chadwell: Unreasonable rest -- no, no, I was saying as a second -- as a second element or second category of cases. No, the unreasonable restraint of trade statute, Sherman Act, was upheld in the Nash case on the ground that restraint of trade or unreasonable restraint of trade was well-enough known at the common law for a sufficient standard.
Hugo L. Black: Can you make in a more definite -- accurate definition of it than it's made here with reference to prices?
John T. Chadwell: Well, I say to the Court, Mr. Justice Black, that there's quite a difference between unreasonable restraint of trade which has a common law meaning and a well-accepted meaning, and unreasonably low prices which has no meaning at the common law, in business or custom or society at all. And it was -- because of that difference which I have just stated that the Court in the -- in Cline against Frink held to be invalid. The statute there which provided for permissible -- which provided against combinations in restraint of trade provide that reasonable profits or satisfaction would not be illegal, the only combination which resulted in a reasonable profit. The Court said reasonable profits is meaningless and they distinguished the antitrust or the Nash case on the ground that in that case there was a -- an established common law meaning. But I say permissible general terms can be put in statutes of course even if they have no common law meaning if they have a well-accepted business meaning, or well-accepted meaning otherwise such as fraud -- a faking of -- or patting of business expenses. The Court said in Regan, “Everybody knows whether he has truly stated his expenses or not, and what is forbidden in the Act is falsifying expenses.” There is -- that furnishes a sufficient standard and that -- and the -- the Act was upheld. I say it's a very different thing for the reasons which I have stated from the -- from a unreasonably low price prohibition when there's absolutely no standard of any kind which --
Hugo L. Black: What would be -- what would -- what -- what would you suggest would be the difference in the Court charged to the jury in defining what -- asking him to decide whether it's been an unreasonable restraint of trade, and asking him to decide it whether there's been unreasonable price?
John T. Chadwell: Well, I think the very easy restraint -- charge a jury on unreasonably restraint of trade on the basis of many, many instructions has been given over a period of many years.
Hugo L. Black: I understand that but I was just trying to see if we could capture the idea here, the difference.
John T. Chadwell: Well, in the first place --
Hugo L. Black: -- maybe there is -- maybe it's enough just to say common law used a lot of words about what was restraint of trade.
John T. Chadwell: Well, there is a very well-accepted meaning for restraint of trade. There's no question about that. There is no well-accepted meaning for unreasonable price --
Hugo L. Black: How can you tell a layman on the jury to determine whether or not that's an unreasonable restraint of trade?
John T. Chadwell: How can you?
Hugo L. Black: As distinguished from telling him whether there's been an unreasonable price. Now, my -- my question that I asked you is indicating any view one way or the other.
John T. Chadwell: I understand sir.
Hugo L. Black: I do not intend it to.
John T. Chadwell: I understand sir. I do not think it is possible to -- to instruct the jury as to what is the meaning of an unreasonably low price, because I don't think there is anything in law or custom that would enable you to do so.
Hugo L. Black: Well, if you buy in some groceries, let it be known that they are charging you 200% profit on items that -- not much trouble to handle. Would that -- would you say it's impossible for you to bring about -- think about what's an unreasonable price?
John T. Chadwell: Well, I don't know that. I say that the -- that under the decided cases in this Court, we are entitled to have that standard set forth in the statute.
Hugo L. Black: I think you're right.
John T. Chadwell: And this -- and the statute is -- and the standard is not set forth in the statute. And I say that there's no way that I can think of to the advice and instruction on unreasonably low prices, unless you just arbitrarily say it's a matter of dollars and cents, how are you going to arrive at it?
Hugo L. Black: I agree to the difficulty. I was asking you if there's any similar difficulty in unreasonable restraint of trade.
John T. Chadwell: Well, the unreasonable restraint of trade instructions can be based upon the -- the common law.
Hugo L. Black: In either way, you don't have to meet that here.
John T. Chadwell: I don't have to meet that here.
Hugo L. Black: That's the problem (Voice Overlap)
John T. Chadwell: But if Your Honor please, I think the distinction is a -- is a valid one that for an unreasonably low -- for an unreasonable restraint of trade instruction, you've got ample authority in the law already established starting with the common law as was stated in Cline against Frink. You don't have that for unreasonably low prices or indeed you don't have it for sales below cost unless you define cost. And that gets back to the question as to what Congress could have done, and I say they could have done what the state legislatures did if they really mean to forbid sales below cost and it's not at all clear from the legislative history or from the words unreasonably low prices that they did. In fact, as I've argued, unreasonably low prices and below cost are no sense the same.
Earl Warren: Mr. Chadwell --
John T. Chadwell: Now --
Earl Warren: What do you do with --
John T. Chadwell: Yes, sir.
Earl Warren: -- what do you do with cases like Petrillo --
John T. Chadwell: Well in Petrillo, if the Court please, the -- the Court held first that you must decide the -- the case on the face -- on the basis of the face of the statute. And the Court did decide it on the basis on the face of the statute, and having made that decision, recently conclusion that it was sufficiently dealt with. The statute there of course made it a crime for a -- for a union leader to require and an -- an employer to have more employees than necessary words to that effect. And the Court --
Earl Warren: Is that -- is that more -- is that more direct or more definite than this?
John T. Chadwell: I certainly think it is Your Honor. I certainly think it is because the Court held in that case that it was a term that had meaning -- that had meaning in business that -- that is ascertainable for that reason. And -- but it -- but it went right to the face of the statute and decided the case on the basis of that term used in the statute rather than upon any narrower construction of the -- of the statute itself. I --
Felix Frankfurter: Well, what the Solicitor General argued is that unreasonably low means having no economic or business justification.
John T. Chadwell: But I say, if the Court please, that there is no way to determine whether it has an economic or business justification. There are many, many prices that are below cost -- that are be low cost which could have and do have an economic and business justification as I have tried to -- and I have tried to point a few of them --
Felix Frankfurter: But the whole --
John T. Chadwell: -- in my argument.
Felix Frankfurter: -- price leader, the whole -- the whole -- whole of fair trade statute on that assumption.
John T. Chadwell: That's another -- that's another example, if Your Honor please. Under -- the Department has prosecuted -- has prosecuted businessmen for trying to prevent loss leader sales or two for one sales or one cent sales or these other sales promotions which are all below cost, have prosecuted them on the ground that that's normal competitive activity, that's perfectly proper. Those sales were below cost. How is the Government going to say that Sale A which is below cost like the loss leader sales or like the erroneous projected volume sales, that sale below cost is alright or as some other sale is all wrong. The fact that there may be a below defendant's cost as finally ascertained after the returns are all in and the -- and the figures are entered in the books does not necessarily make it unreasonable or uneconomic or on business alike --
Felix Frankfurter: I'd suppose the Department gives you the comfort that -- Justice Holmes gave comfort in the Nash case that would -- well that's what a fair-headed reasonably minded juries will take care of.
John T. Chadwell: Yes -- yes Mr. Justice Frankfurter but I say we are entitled of this notice and this definition and this standard in the statute. And that it's not enough merely to have an instruction after we're told by the -- in indictment to what it means to have an instruction that enables the jury to pass upon it.
Earl Warren: Well, Mr. Chadwell would you --
John T. Chadwell: Yes, sir.
Earl Warren: -- would you just explain briefly to me how you distinguish the word unreasonably low prices as -- as in this case from the words in excess of the number of employees needed by such licensee to perform actual services as the words of the statute were in the Petrillo case?
John T. Chadwell: If Your Honor please, I can only -- in doing so, I can only use the -- the words of the Court which I think were applicable in that -- in --
Earl Warren: Well, that --
John T. Chadwell: -- that case. And that -- I beg your pardon, I didn't --
Earl Warren: Well, I'm just -- I'm just wondering what -- we know what the Court --
John T. Chadwell: Yes.
Earl Warren: -- said. The Court held that that was constitutional. Now, what I'd like to know is what you think can justify the Court in doing that and -- and then holding this one to be unconstitutional.
John T. Chadwell: The Court helds that in that -- and I -- I think properly so, in that case, there were -- there were means of common understanding and common practice, so that the standard was ascertainable. That's what the Court held there. I say for the reasons that I have argued to the Court, the words below cost have no general meaning, are not ascertainable, a great many sales can be below cost that are in no sense unreasonable, and that makes the standard indefinite and contrary to the Fifth Amendment. And I say in the second place, there's nothing in this statute that prohibits sales below cost in -- in terms anyway. It's unreasonably low prices. And that, likewise, has no meaning in the law, has no meaning in common understanding, and I distinguished Petrillo on that ground. I -- I want to say in -- in conclusion, if the Court please, that we have argued a number of other points in the brief, which I shall not have time to argue in my oral argument. The first one being that this indictment does not limit the charge to sales below cost, because it charges in the general words of the statute. We argue that and explain our position, beginning on page 6 of our brief. I do not have time to discuss it at this time, and we'll rely upon our brief position there. Although I repeat, that we do not depend entirely by any means upon that construction argument, but upon the fundamental proposition that I have -- I've tried to argue to the Court, that the term unreasonably low prices is in -- too indefinite as well as the term below cost if the indictment -- if the statute should be interpreted to be limited to below cost. I thank the Court.