Document: 360 U.S. 55 79 S.Ct. 1005 3 L.Ed.2d 1079 FEDERAL TRADE COMMISSION, Petitioner,v.SIMPLICITY PATTERN CO., Inc. SIMPLICITY Inc., Petitioner, v. COMMISSION. Nos. 406, 447. Argued April 21, 1959. Decided June 8, Rehearing Denied Oct. 12, See 80 41. Mr. Charles H. Weston, Washington, D.C., for Federal Trade commission. William Simon, Simplicity Pattern Co. Justice CLARK delivered the opinion of Court. 1 This case presents, first time in this Court, issues relating to availability certain defenses a prima facie violation § 2(e) Clayton Act, 38 Stat. 730, as amended by Robinson-Patman 49 1526.1 The Commission has found that Co., one Nation's largest dress pattern manufacturers, discriminated favor its larger customers furnishing them services and facilities not accorded competing smaller on proportionally equal terms. held neither presence 'cost justification' nor absence competitive injury may constitute defense violation. 2 Court Appeals competition existed between thee and, with judge dissenting, an would 'justification' rebutting showing Through different majority,2 however, it remanded under 2(b), holding might rebut discriminations were justified differences Simplicity's costs dealing two classes customers. 103 U.S.App.D.C. 373, 258 F.2d 673. Commission, No. Simplicity, 447, filed cross-petitions certiorari which we consider together. We granted both petitions because fundamental significance these application important Act Congress. 358 897, 221, 148. have concluded that, given customers, defeats enforcement provisions Act. action issuing cease-and-desist order is, therefore, affirmed. manufactures sells tissue patterns are used home making women's children's wearing apparel. Its volume sales, terms sales units, is greater than resulting from combined effort all other major producers.3 sold some 12,300 retailers, 17,200 outlets. For present purposes, can be divided roughly into categories. One, consisting largely department variety stores, comprises only 18% Of total number but accounts 70% volume. remaining 82% small stores whose primary business sale yard-good fabrics. 4 About 600 made available New added at rate 40 per month, while three times annually obsolete designs discontinued so maintain relatively constant level. displayed catalogue changed monthly reflect changes designs. themselves stored steel cabinets. catalogues storage cabinets furnished Simplicity. 5 handle sell multitude low-priced articles. Each article, including patterns, purpose returning profit dropped if failed do so. fabric hand, primarily interested selling yard goods; they no or even loss accommodation their stimulating sales. These motive reflected manner each type store handles patterns. devote minimum amount display space consistent adequate merchandising—consisting usually nothing more place counter catalogues, underneath In contrast, provide tables chairs where peruse comfort leisure. 6 retail prices uniform 25$, 35$, 50$. Similarly, charges price, 60% price. However, inthe does follow uniformity. It furnishes consignment basis, requiring payment when sold—thus affording investment-free inventory. required pay cash regular course. addition, free charged therefor, averaging $2 $3 each. Finally, transportation connection paid none fabricstore transactions. 7 thus chains substantial value. As four chains, 1954 valued $128,904; those had hand end over $500,000; inventory was $1,775,000, values being based usual president testified cost $2,000,000 give transportation, stores.4 8 dispute findings. Assuming existence purchasers necessary element prosecution, insists real exists stores. also contends conduct resulted or, alternatively, unlawful could shown differential treatment reflective types 9 1. EXISTENCE OF COMPETITION. 10 unanimous conclusion Examiner, point was, stated Appeals, 'operating same cities shopping area, often side side, competitors, purchasing price then like retailing identical product substantially segment public.' 378, page 677. argues 'motivation' controls since minuscule. But depend such motives. Regardless necessity find handling remove incentive especially tied up keeping shelves. discriminatory obliged increase losses. Furthermore, takes advantage captive nature granting advantages compounds damage creating outlet through incentives engage business. Without partial subsidization enter trade all. 11 Nor failure here show specific inconsistent finding fact exists.5 be, argues, minuscule overall store, true thousands items. While giving concessions any isolated item cause operation, render nonexistent actual remains, concessions, causes further losses store. said Comm. Morton Salt 1948, 334 37, 49, 68 822, 829, 92 L.Ed. 1196. 12 'There many articles grocery considered separately, comparatively parts merchant's stock. Congress intended protect merchant attributable goods interstate commerce, whether particular constituted minor portion his Since consists articles, there possible way effectively grocer except applying prohibitions individual article store.' 13 2. APPLICATION THE JUSTIFICATION DEFENSES 2(b). 14 constitutes justification 2(b) should been permitted, subsection, dispel discrimination lower transactions agree language entirety, will support construction. 15 Section 2(a) makes 16 'where effect lessen tend create monopoly line injure, destroy, prevent * *.' 17 provision hedged qualifications. An exception differentials 'which make due allowance manufacture, sale, delivery.' Care taken outlawed response changing market conditions. codifies rule United States Colgate & 1919, 250 300, 39 465, 63 992, protecting right person commerce select 'own bona fide restraint trade.' Subsections (c), (d), (e), unqualifiedly practices discriminations.6 Subsection (c) applies receipt commissions brokerage allowances 'except rendered.' (d) prohibits seller customer latter, unless 'such (competing) customers.' noted applicable case, 18 'to discriminate purchaser against another commodity bought resale connected processing, handling, offering purchased upon terms.' 19 terms, proscriptions subsections absolute. Unlike 2(a), requires, proof violation, illicit practice injurious destructive competition.7 built-in defensive matter, 2(a). contentions boil down argument exculpatory expressly somehow included 'justifications' 2(b),8 provides 20 'Upon made, hearing complaint section, furnished, burden prima-facie shall vi olation affirmatively shown, authorized issue terminating discrimination: Provided, That herein contained primafacie good faith meet equally low competitor, competitor.' (Emphasis added.) 21 hold key word read broadly allow rebuttal respective offenses ways Thus, rebutted provisos, proviso9—all apply discriminations. On escape provided permission proviso. cannot supply what studiously omitted.10 22 arguments contrary essentially ground 'bad law bad economics' accounted injury.11 Entirely aside position review economic wisdom Congress, say legislative decision treat differently without rational basis. allowing others, very well felt sellers forced confine differentials, readily detected much easier accurate comparisons alleged savings.12 Biddle Purchasing Comm., Cir., 1938, 96 687, 692. And, respect requirements, suffices antitrust laws strangers policy nipping potentially before reach full bloom. Cf. Klor's Broadway-Hale Stores, 1959, 359 207, 705, 741.13 23 Our conclusions confirmed historical setting amendments originally worded 1914 (38 730), applied discriminations, commerce.'14 proviso excepted 'differences quantity sold,' regardless corresponding differentials. 24 A lengthy investigation conducted 1930's disclosed several large chain buyers avoiding taking gaps coverage. Because enormous power, able exact quantity, far exceeded related savings seller. Consequently, raise lots cover purchasers. Comparable obtained direct concessions. Rebates induced 'brokerage fees,' though performed. 'Advertising allowances' return promotional undertaken latter. Some special buyers. Lacking power demand comparable advantages, independent hopeless disadvantage.15 25 enacted eliminate inequities. quantitative limited 'only difference cost.' above, false paying nonproportional banned outright. preceding proviso, relies, inserted House bill sole laying 'directions reference procedure statement proof.'16 clearly substantive weight own.17 26 hold, 'cost-justification' violation.18 judgment must accordingly reversed insofar set Commission's affirmed remainder. 27 ordered. 28 Judgment part part. counts, count dismissed. second count, us, involves U.S.C. 13, U.S.C.A. 13. ready quote entirety: '(a) engaged course either directly indirectly, commodities grade quality, purchases involved use, consumption, within Territory thereof District Columbia insular possession jurisdiction States, who grants knowingly receives benefit discrimination, them: eli differing methods quantities delivered: may, after parties, fix establish limits, revise finds necessary, commodities, few account unjustly promotive commerce; foregoing construed permit fixed established: And further, persons goods, wares, merchandise selecting own trade: conditions affecting marketability concerned, imminent deterioration perishable obsolescence seasonal distress court process, discontinuance concerned. '(b) Upon competitor. '(c) grant, receive accept, anything value commission, brokerage, compensation, discount lieu thereof, rendered purchase merchandise, party transaction agent, representative, intermediary therein acting behalf, subject indirect control, whom compensation paid. '(d) contract consideration products manufactured, sold, offered person, distribution commodities. '(e) resale, contracting furnish furnishing, contributing of, '(f) induce ece ive prohibited section.' Judge Washington dissented issue, Burger dissent question. dollar volume, percentage-of-industry somewhat lower, among lowest industry. apparently acted entirely faith. described body admittedly asserts claimed include: staff young ladies travels throughout country fashion shows sewing demonstrations schools, 4-H Clubs like. coordinated local assist latter pushing Large posters, portraying fabrics trends, 'Flyers,' brochures, designed, printed distributed solely merchant, tell him (in words president) 'what proper sources York, trends are, how trim windows, run aspects great deal material.' publication called 'Simplicity Book' annual $100,000. designed 'glamorize dramatize consumer textiles country.' method doing claims facilities, $1,000,000 annually, parties did explore, possibility tailoring needs 'proportionally course, raised note passing, indicated willingness broad scope standard proportional equality §§ 2(d) 2(e). Lever Brothers 50 F.T.C. 494, 512 (1953). ('(§ 2(d)) prohibit various types.' 'plan providing honest fair reasonable application.') Proctor Gamble Distributing 513 (1953); Colgate-Palmolive-Peet 525 Report Attorney General's National Committee Study Antitrust Laws 189—190 (1955). properly befoe u s, pass it. Examiner 'affirmatively injury.' view adopted Appeals. 678. record, however. What 'there (f) corollary 'knowingly receive' barred Automatic Canteen 1953, 346 61, 73 1017, 97 1454. concedes this, effect, allowed 'justify' affirmative injury. negated inference thereby importing '§ criteria matters charge.' Rather, 'the clause charge 'facilities furnished' (would) facts case.' 381, 681. (Italics original.) theory, limits established litigation, case-to-case Standard Oil 1951, 340 231, 71 240, 95 239. Courts prior uniformly rejected violations cost-justification adverse competition. Elizabeth Arden, 1946, 156 132 (competitive injury); Corn Products Refining 1944, 144 211, 219, grounds 324 726, 65 S.Ct 961, 89 1320 Southgate Brokerage 1945, 150 607, 610 (dictum Great Atlantic Pacific Tea 1939, 106 667 cost-justification); Oliver Bros., 102 763, 767 injury). appear previously asked decide Compare recognized date (e) interpreted injury, defense. Pp. 187—193. expressed disagreement desirability result, deemed 'broader objectives,' recommended 2(c) legislation 'interpretive reform.' P. 93. During congressional debates bill, continual references 'secret' See, e.g., Cong.Rec. 8126, 8127, 8132, 8135, 8137, 8226. Northern R. 1958, 356 1, 78 514, 545; Socony-Vacuum 1940, 310 150, 60 811, 84 1129, contain examples se Sherman 1—715 note. earlier versions Senate bills regard H.R. 8442, 74th Cong., 1st Sess.; S.3154, Sess. retained amendment, following added, 'or them.' Final Chain-Store Investigation, S.Doc.No. 4, H.R.Rep. 2287, 2d Sess., p. 16. reported out Committee, equivalent (which bill) floor debate, Congressman McLaughlin introduced amendment add appropriate places subsection. He said, 'Mr. Chairman, committee agreed unanimously committee. simply allows asel ler competitors furnished.' 8225. comment. Throughout subsection (other proviso) 'procedural' 'burden proof' provision. 8110, 9414, 9418. Patman, referring provision, 'Let me analyze you. mean? means exactly today. restatement existing law. So I am concerned you strike out. difference.' 8231. statement, coming authors clear beyond peradventure question operate source defenses. supra, U.S., 78, 1026. history helpful. S.Rep. 1502, facilities. 6435—6436. short debate enlightening. questions presented us convinced cost-differential clauses 10; 10. clause, 'Time again recognition freedom adopt benefits economical processes.' 72, 1023. contexts statements referred 8106—8107, 8111-8112, 8114, 8127—8128, 9415; notes supra.

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