Document: 363 U.S. 166 80 S.Ct. 1158 4 L.Ed.2d 1124 FEDERAL TRADE COMMISSION, Petitioner,v.HENRY BROCH & COMPANY. No. 61. Argued Jan. 14 and 18, 1960. Decided June 6, Mr. Daniel M. Friedman, Washington, D.C., for petitioner. Frederick Rowe, respondent. Henry J. Bison, Jr., the National Association of Retail Grocers United States, as amicus curiae. Justice DOUGLAS delivered opinion Court. 1 Section 2(c) Clayton Act, amended by Robinson-Patman Act,1 makes it unlawful 'any person' to make an allowance in lieu 'brokerage' 'other party such transaction.' The question is whether that prohibition applicable following transactions 2 Respondent a broker or sales representative number principals who sell food products. One Canada Foods Ltd., processor apple concentrate other agreed act 5% Commission. Other brokers working same principal were promised 4% Respondent's commission was higher because stocked merchandise advance sales. established price its 1954 pack at $1.30 per gallon 50-gallon drums authorized negotiate price. 3 Smucker Co., buyer, negotiated with another broker, Phipps, also Foods, concentrate. wanted lower than but would not agree. finally offered $1.25 500-gallon purchase. That turned down acting through Phipps. took position only way could be lowered reduction brokerage. About time respondent negotiating Smucker. told what had buyer reduced if brokerage cut; added sale $1.25—the buyer's bid—if agree reduce from To 3%. consummated thereafter granted on subsequent But all customers, brokers, continued each instance received full Only selling reduced. customary fee have been $2,036.84. actual 3% Received $1,222.11. $814.73 which 50% Of total $1,629.47 5 Commission charged violating § after hearing making findings entered cease-and-desist order against Court Appeals, while questioning fact Commission, reversed. 261 F.2d 725. case here writ certiorari, 360 908, 79 1297, 1259. 6 Act enacted 1936 curb prohibit devices large buyers gained discriminatory preferences over smaller ones virtue their greater purchasing power. A lengthy investigation revealed chain obtaining competitive advantages several ways direct price, concessions2 thus avoiding impact Act.3 favorite means indirect concession setting up 'dummy' employed who, many cases, rendered no services. demanded seller pay these fictitious then employer. This practice one chief targets Act.4 function abused5 Congress wisdom phrased broadly, cover methods existence used effect discrimination.6 7 particular evil aimed can easily perpetrated seller's himself. his course any they wish. Yet when upon one, necessary meet demands favored use undermine policy 2(c). clearly words are 2(c)—as broker. 8 It urged free pass form differential between ordinary expense he pays 2(a)7 permits differentials based savings costs resulting differing distribution. From this premise reasoned should held violated having done permitted under 2(a). We need decide validity premise, transaction may violate section does answer has violated. 2(c), we concerned, independent 2(a) considered adequate deal abuses function.8 9 Before passed buyers, maintained own elaborate departments therefore did services bought directly seller, allowances reflecting cost In cases required paid agents. After discarded facade merely equivalent expenses customers. When haled before protested covered but, since reduction, governed They argued needed them, entitled saving. anticipated contention 'in thereof' provision.9 Accordingly, Commission10 courts11 early rejected lawful organization saved amount expense. 10 Great Atlantic Pacific Tea Co. v. Federal Trade Comm., Cir., 1939, 106 667, sought evade accepting reductions normal payments. court upheld Commission's view prohibited even though, fact, 'saved' dealing select buyer. justify ground valuable seller. argument also. Although court's interpretation 'services rendered' exception criticized,12 conclusion within meaning followed13 accepted.14 11 asked distinguish precedents there claim present concededly part saving regular sale, justified elimination normally performed There evidence nor anything method getting charge. quite different explore applicability circumstances. thing clear—the absence rendition distribution support 12 aware respondent's immaterial. discrimination, conspiracy. intent might relevant receiving violation certainly bearing law. powerful concerned it. He care comes both. 13 prevent sellers sellers' yielding economic pressures buying granting unfair connection goods. pressure exerted immaterial proof required. rare motive 'necessity' sale. An 'independent' likely coercive bargaining He, like constrained favor most If Act. see distinction substance two transactions. consequence both result reduces usual get contract. difference splitting buyer15 price.16 conclude statute applies payments made indirectly, proscribed those which, said, encompasses broker.17 His sine qua non reduction. say every coupled brokerage, automatically compels lieu' granted. As itself clear, tantamount payment depends circumstances case. Main Fish Inc., 53 F.T.C. 88. Nor 'fuse' provisions 2(a), defense justification, not; realistically interprets prohibitions including broker's obtain order. 15 suggested reversal establish irrevocable floor rates. think foundation Both Smucker, charge On buyers. nothing case, require him continue customers.18 alleged 'allowance brokerage' given Had respondent, example, accept plainly room finding violations Neither legislative history purposes absurd result, neither courts ever Here, however, discriminatory. 16 distinguishable principle supported 20-year-old administrative interpretation. Beginning 1940, four years passed, restrained account behalf sold goods purchasers them local 2(a).19 17 here, disregard delineated, overturn settled practice, approve construction hostile statutory scheme—one leave loophole Any doubts theory embodied questions resolve. 18 Reversed. 19 WHITTAKER, whom FRANKFURTER, HARLAN STEWART join, dissenting. 20 holds, effect, action engaged reducing contract rate purpose enabling constitutes U.S.C. 13(c), U.S.C.A. 13(c). 21 Respondent, Chicago, Illinois, Kentville, Nova Scotia, procure orders products basis made. States similarly 4%. announced separately solicited Company Orrville, Ohio, product. willing purchase quantity product, Finally, permit latter Thereupon, accepted filled order, agreed. advised 22 Thereafter, appears first proceeding type, allowing portion fee, and, hearing, Appeals reversed, holding moreover value commission, compensation 23 reversing now holds 'clearly seller.' my view, presented admitted facts Court's terms object actually opposed declared shown history. 24 'unlawful person * grant compensation, discount thereof, except either agent, representative, intermediary therein where so paid.'1 (Emphasis added.) 25 phrase includes, course, truly poses true question, agreement paying 'anything compensation,' thereof,' 26 (the) goods,' intermediary. Rather, conceded know 'acting (seller) (the was) granted.' not. Nor, indeed, compensation' (its) behalf.' What much surely clear constitute For did, legitimate rates frozen destruction competition, antitrust laws. 27 I turn motivating factor behind enactment demanding concessions guise 'dummy 'allowances' 'services' claimed sellers, performed.2 Congress' eliminate evil. designed intermediary, 'where (of buyer).'3 perform party, intended proscribe him, intend fix freeze otherwise interfere operations.4 referred to, embrace affect legitimately brokers' 28 pointed out, received, 'allowance,' services.5 obtained 'savings' effected broker.6 am, therefore, unable understand how thought Constituted granting, 'a Since involve simply type kind Inasmuch shows charges services, submit ought extend construction. 29 Until today, seems always generally understood commissions without fear 2(c).7 Such expressed congressional intention.8 Surely left negotiation contend Likewise, if, instead dealt once general renegotiate lost him. previously into concerning not, controlling, sound reason why must regard establishing amounts avoid consequences. me unwarranted interference operations, contravention intent. 30 Quite obviously, real concern received. But, aim means, borne mind choose condemn differences purchasers. outright discriminations lessen contains, proviso 'nothing shall due manufacture, delivery quantities commodities delivered.'9 incorporated 'preserving public benefits efficient marketing subjecting 'unearned' reasonably related some delivery.' Report Attorney General's Committee Study Antitrust Laws (1955), p. 171. See H.R.Rep.No. 2287, 74th Cong., 2d Sess., pp. 9—10. 31 evident intention prices, ascribing uses do sales, static. include 2(c).10 (or elimination) fees representing well phase process, may, proper validly buyer.11 Once recognized, understanding performed, benefit choice contemplated actionable subject valid 'cost justification' defense. high standards sustain possibility subterfuge rebate broker.12 32 However, expansive reading gives opposition, believe, history, provision applied though solely arising am perceive consequent obvious thwarting allow 33 Indeed, display potential sweep today's decision. declares includes 'an order,' pains point out 'the discriminatory.' asserts mean 'that granted,' indicating 'whether case.' Even further, absolute rule buyers—justifying stating single deserved treatment.' 34 efforts limit represent recognition apparently prepared hold read results costs, cases. expressly discrimination element proscriptions, provide defenses costs; contains provisions. And said just last Term, construing 2(e) '(w)e cannot supply studiously omitted.' Comm. Simplicity Pattern 55, 67, 1005, 1012, 1079. 35 that, leaving door open justified, things. Either has, recognized policies underlying tested section, concluded sub silentio none despite our Pattern, supra, notwithstanding disclaimer, fused thereby weakened materially se thrust applicable, have. 36 statute. me, presenting situation purchasers, effects possible savings, proceeding, challenged will afforded opportunity question—an adroit footwork serves effectively illustrate reasons us rather affirm judgment Appeals. *.' supplied.) 49 Stat. 1527, Final Chain-Store Investigation, S.Doc. 4, 1st Sess. (1935). originally 1914 (38 730) 'substantially competition tend create monopoly.' modified retained note 7, infra. S.Rep. 1502, 7; H.R.Rep. 14—15; 69, 1013, 2, examples agents instances discounts, allowances, fewer all. Id., 25, 63. These described report giving 'allowances (id., 62) 'discount(s) brokerage.' 27. House Judiciary 'with abuse oppressive discrimination.' 14. although mentioned Reports, debates bill show practices 'bribing' Cong.Rec. 7759 7760, 8111-8112. 13(a), provides, part: 'It commerce discriminate grade quality substantially monopoly grants knowingly receives customers them: Provided, delivered.' reported Senate excepted 5. reference deleted. done, according Conference Report, 'for matter subsection bill.' H.R.Conf.Rep.No. 2951, 6. By striking showed 'legitimacy' entirely language sufficiently broad reflect costs. barren indication change deletion. precludes inference. clause directed buyers' phrases 'or 'either intermediary).' 7. 'This phrasing law obviously evasion restriction mere modification assumed seek convert hitherto reduction.' Zorn Feldman, Business Under New Price (1937), 219. intervention currently issued in, e.g., 486 (1938), affirmed 667; General Grocer 377 (1941); Giant Tiger Corporation, 830 UCO Food 924 R. C. Williams 1182 A. Krasne, 121 Ramsdell Packing 1187 Union Malleable Mfg. 52 408 (1955). memorandum decisions 1192, 1193 (1941). Southgate Brokerage 1945, 150 607 (buyer's behalf). (1955) 192, 193; Oppenheim, Legislation: Guideposts Revised Policy, 50 Mich.L.Rev. 1139, 1207, n. 178; Discrimination, Competition, Confusion: Another Look Robinson-Patman, 60 Yale L.J. 929, 957—958. 11. cited, 10, supra. speaking interpretations leading authority said: 'Here too Congressional precision. envisaged transmission name deprive substance.' Administration Provision Geo.Wash.L.Rev. 511, 535. Oliver Bros., Inc. 102 763, 770. states 'prohibits rendered.' (Italics H.R.Conf.Rep. Several writers, co-authors viewed covering Patman, 102, 108; Austin, Discrimination Related Problems Am.L.Inst. (rev. ed. 1953), 108. (See rev. ed., 1959, 116); 544 (1940); Edwards, Law (1959), 104. op. cit., respecting 'To waive purchaser assess represents attempt divorce item rest when, whole, gain foothold increase proportions demoralize industry part.' Cf. Robinson Stanley Home Products, 272 601, eliminated entirely, converted selling, prices. Albert W. Sisk Son, 1543 F. Unruh 1557 G. Reaburn 1565 William Silver 1589 H. Ruff 1573 Thomas Roberts 1551 American 1581 E. 370 Custom Corp., 43 164 (1946). laying passing emphasized, treatment. provides that: commerce, grant, receive accept, goods, wares, merchandise, behalf, control, paid.' 'Among prevalent modes directed, certain demand purchases, employee, corporate subsidiary set Whether good faith find source supply, market, discharges appropriate whose interest serves. service rendered, 'broker,' labeled, enters picture all, points brings corruption discrimination. relation client fiduciary one. collect adverse relationship; protect streams breaches relations trust, foster confidence processes promote wholesomeness volume.' 14—15. 'Section ((c)) agent behalf: Likewise behalf; prohibits rendered. buyer; other.' 15. stated Senator Logan floor: 'The deals schemes shams bring about whatever employer proposed act.' 3118. 'I speak Let beginning indirectly. Where renders necessary. field interfered with.' 6281. Biddle Purchasing 96 687; 763. 607, 'saving' organization. distinguished nature operation, more, enables See, 190—191; 178. 4. pertinent line injure, destroy, contained sections 12, 13, 14—21, 22—27 title proceedings, see, (1946), conflict accord emerged Committee, addition clause, permitting: '* cost, delivered. *' explained deemed 'to harmonize below, discussion respect addition, commented: perhaps allowed drafted—I write bill—perhaps amendment inserted dummy sham something that. call attention Senate, Senators consider it.' 6285. deleted proviso, among proviso. intimate available First Circuit recently fundamental discussed here. 601. generally, Note, 57 926. 2(f) 13(f), Which induce section,'

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