Legal Document

383 U.S. 637 86 Supreme Court Reporter 1092 16 United States Reports Lawyer’s Edition 2d Series KF101.8 U54 153 FEDERAL TRADE COMMISSION, Petitioner,v.The BORDEN COMPANY. Number 106. Argued Jan. 19, 1966. Decided March 23, Robert baron Hummel, Washington, D.C., for petitioner. John E. Federal KF105 F3 Wood, New York City, respondent. Mr. Justice WHITE delivered the opinion of Court. 1 The Borden Company, respondent here, produces and sells evaporated milk under name, a nationally advertised brand. At same time packs markets various private brands owned by its customers. This is physically chemically identical with it distributes own brand but sold at both wholesale retail level prices regularly below those obtained milk. Trade Commission found labels to be like grade quality as required applicability § 2(a) Robinson-Patman Act,1 held price differential discriminatory within meaning section, ascertained requisite adverse effect on commerce, rejected Borden's claim cost justification consequently issued cease-and-desist order. Appeals set aside Commission's order sole ground that matter law, customer label was not 5 Cir., 339 Reporter, 2nd 133. Because importance this issue, which bears reach coverage Act, we granted certiorari. 382 807, 31, 15 57. We now reverse decision remand case court determination remaining issues raised in court. Cf. commission versus Anheuser-Busch, Inc., 363 536, 542, 80 1267, 4 1385. 2 position quality, threshold finding essential 2(a), may based solely physical properties products without regard names they bear relative public acceptance these enjoy—'consideration should given all commercially significant distinctions affect market value, whether or promotional.' F.2d, 137. Here, because bearing higher than did buyer's label, considered 'commercially' different hence 'grade' purposes even though were equal quality. Although mere difference would itself demonstrate grade, decided consumer preference one over another, reflected willingness pay well-known brand, was, view Appeals, sufficient differentiate place beyond 2(a). 3 reject construction examiner case. do purpose determining have more appeal command marketplace from substantial segment public. That long-standing interpretation present well Clayton Act before amendment Act,2 gathered decisions dating back 1936. Whitaker Cable Corp., 51 F.T.C. 958 (1955); Page Dairy Co., 50 395 (1953); Rubber 46 998 (1950); 28 1489 (1939); Hansen Inoculator 26 303 (1938); Goodyear Tire & 22 232 (1936). These views agency are entitled respect Mandel Brothers, 359 385, 391, 79 818, 893, represent reasonable statute offered Appeals.3 Obviously there nothing language indicating distinguished determined characteristics product itself, preferences, acceptability what customers think willing it. Moreover, legislative history concerning question supports rather Appeals. During 1936 hearings proposed amendments attention Congress specifically called practice manufacturer selling his he charged when label. feared require elimination such differentials, Hearings H.R. 4995 House Committee Judiciary, 74th Cong., Sess., 355, 'would (thus) put out business brands,' suggested amended so apply only sales commodities 'like brand.' (Emphasis added.) Id., 421. There strong objection adopted Committee.4 rejection assumes particular significance since pointed legality differentials between proprietary then pending 232. By Report written, had Goodyear. report quoted interpreted holding violated 'at no offer dealers tires comparable Sears, Roebuck Co.' H.R.Rep. 2287, 4. 6 debates bill, Representative Patman, bill's sponsors, asked about issue. His brief response wholly consistent Cong.Rec. 8115: 7 'MR. TAYLOR South Carolina. has grown up part manufacturers making certain goods chain stores. Is anything bill calculated remedy situation? 8 PATMAN. * N Dec. Immigration Nationality Decisions discuss feature, will protect independents way, sell where merchandise package, situation gentleman refers. 9 'Mr. Irrespective 10 Yes; long 11 also appears us further policy Act. Subject specified exceptions defenses, proscribes unequal treatment transactions, if upon competition, actual potential. But transactions deemed involve disparate section application never reaches either issue discrimination anticompetitive impact. doubt intended foreclose inquiries situations single seller several brands, own, customers' both. Such too laden potential competitive excluded permitting established alone appeal.5 12 If two products, differently branded, successfully some quantity prices, could, far concerned, make available deny others, however might damaging competition. Those who barred competing want buy other. retailer permitted expensive chance always cheaper convince experience otherwise, fact other already know—that actually carrying 13 seller, escape succeed unspecified amount each portion customers, large small be. seller's pricing branding policy, being successful, apparently validate creating thus taking purview Act.6 14 Our neither ignores economic realities nor denies least does mean 'the factors inherent national advertising jurisdictional inquiry statutory quality' test.' Attorney General's National Study Antitrust Laws 158 (1955). And involved examined determine, subject judicial review, attack competition injured, cost-justified defensible good-faith effort meet competitor. '(T)angible preferences branded unbranded receive due legal recognition flexible 'injury' 'cost justification' provisions statute.' 159 This, think, precisely intended. arguments exempting are, therefore, appropriately addressed Court.7 Commissioner's cannot squared rulings cases presents defense 2(b)8 good faith meeting equally low competitor.9 In cases, said, full commanded 'in reduces premium nonpremium competitiors merely undercutting it.' 138. Commission, hand, sees inconsistency 2(b) cases. view, lower involves considerations presented 17 need resolve contrary position. here relates 2(b), resolved correctly. venture decide them. judgment reversed remanded proceedings opinion. It ordered. 18 Reversed remanded. 19 STEWART, whom HARLAN joins, dissenting. 20 agree chemical identity is, more, basis conclusion travels inferior commercial value logic, history. 21 undisputed attributes constituents identical. price, all, must substantially brand.1 simple reflects obvious reality can create otherwise similar products. pursuing comparison result laboratory analysis, most relevant aspect into 2(a): Whether eyes consumer.2 intrinsic concepts requires exclusion their definition. purchased includes components any competent itemize, host intangibles distinguish marketplace.3 paid consumer's awareness, promoted through advertising, parcel purchasing.4 record indicates purchasers continued purchase undiminished quantities. bought specific expectation acquiring quality.5 Contrary Courts suggestion ante, 644, accurately characterized misapprehension. took extensive precautions insure flawed consumer.6 None taken packed Borden.7 An important ingredient inheres belief, measured past satisfaction reputation tomorrow's contain today. To say, does, intangibles, comprise an product, confer 'quality' ignore difference. '(C)ommercially 'advertised' come minds been wrong; right *. wrong, believed, belief thing.' Farm Products company Ten Eyck, F.Supp. 599, 601 (D.C.S.D.N.Y.) (opinion L. Hand, J.).8 23 spare way inconsistent test quality.' establishes differences design, unaccompanied genuine physical, chemical, distinction, insufficient negate 2(a).9 Nothing speaks precision differentiated factors.10 24 Neither remarks 643, letter Teegarden, 641, n. 4, Court's touchstone Aside obviously casual nature Patman's reply brands,11 go embarrassingly circumspect reading sought them On face, statement makes blanket assertion price. As stated, regardless injury justification, defenses undifferentiated therefore little assistance congressional intent. Far supporting final paragraph Teegarden suggests producer's furnish purchasers, made terms purchasers. Teegarden's concern prevention artificial brand.12 concern, legitimately read proposal add 'and brands' provision bill. rejecting proposal, inferred contemplated 'no exemption 'like' differed *, leaving open reflecting nominal superficial variation.' Rowe, Price Discrimination Under 65 (1962). 25 references 232, inconclusive relevance striking conceded proceeding F.T.C., 290. Sears' 'All State' Sears leading tire manufacturer' world's foremost manufacturer,' independence compromised. 295, 297. administrative precedents relied fail establish consistently settled singularly focus factor quality.13 explicitly resorted marketability minor variations accompany brand.14 caprice distinction invites incorporate slight tangible bring current considering 27 seriously clear 'meeting competition' competitors. emphasize competitor 'meeting' 'beating' Standard Oil 49 923, 952, baldly: '(I)n distribution gasoline analysis factor.'15 29 Could prevent reducing milk? see short maintaining manifestly unstable equilibrium 2(b). adopting keyhole approach manages resolution question, casting grave regarded bulwark against recognized evil. 30 gives 2(a).16 principal rationale restriction simply feasible measure involved. valid variation Once found, ended, just ended found. 31 spite Court, unlikely realistically account 'injury 2(a).17 Even data agreed upon, ratio hardly return prove difficult determine conventional FTC Morton Salt 334 37, 68 822, 92 L.Ed. 1196; Biscuit America FTC, 350 615 (C.A.7th Cir.). 32 threat primary line unclear. No allegation used dominant subsidize predatory price-cutting campaigns market. distribution, essentially geographical discriminations Further, aimed different, price-conscious class consumer. differ markets, notions applicable.18 More important, introduced low-cost product. Thus, chains cooperative buyer organizations chief source countervailing power oligopoly patten production. rise sort known parts food industry.19 circumstances, leverage production sharply curtailed. real resemblance serious practices enacted prevent. 33 impact secondary ambiguous. true enable Borden, selectively Not carry able, right, take advantage could still force Government invoke Sherman deal forms 34 brand.20 speed shelves retailers. avoid supplying customer, forgo customer. foster greater purports eliminate, retailers previously able obtain find access foreclosed well. 35 Automatic Canteen 346 61, 63, 73 1017, 1019, 97 1454, cautioned manner 'give uniformity rigidity conflict antitrust legislation.' Today warning goes unheeded. guise protecting producers legitimate endows authority disrupt relationships whose marketplace. believe conferred Congress, would, affirm Section 38 Statutes-at-Large 730 (1914), Code KF62 13(a) (1964 ed.), provides pertinent part: 'It shall unlawful person engaged course directly indirectly, discriminate purchases use, consumption, resale Territory thereof District Columbia insular possession jurisdiction States, lessen tend monopoly injure, destroy, grants knowingly receives benefit discrimination, them: Provided, herein contained allowance manufacture, sale, delivery resulting differing methods quantities *.' A proviso original excepted 'on commodity (1914). commentators somewhat divided dispute Supporting Austin, Related Problems 39 (2d ed. 1959); Edwards, Discrimina- tion Law 463—464 (1959); Seidman, Cases, reprinted Hoffmann's Techniques 409, 424 428 (1963). expressed minority Committee; 75 (1962); Cassady Grether, Proper Interpretation 'Like Grade Quality' Meaning So.Cal.L.Rev. 241 (1957). Haw. Hawai‘i KFH45 A2 counsel Wholesale Grocers Association, played drafting 1st 9, supplemented oral testimony amendment: 'To amend inserting after words 'commodities quality,' Judge Watkins, although seem harmless first sight, specious destroy entirely efficacy larger buyers. So amended, impose limitation whatever except purchaser, namely designed. Kroger independent use Atlantic Pacific KF135 P2 canned fruit, example; leave every free standard purchaser give him discount demand. 'Under Patman stands, brands; ready terms, comparative costs, brand; unless equality assured, suppressed.' 469. argues spends sums ensure high shelves, inferring really labels, Of course, difference, here. findings write premise purchase. extra expenses connection us. stop insulating sales. immunize producer-owned less having 'consumer preferences,' dissenting opinion, 648, why milk, commands consumers quality? context perhaps refined preclude grounds consumer, ultimate Taking approach, customer's program, charges time, buying himself reduced container longer other, containers came Borden. determinative spent money created preference—Borden's hands customer's. dissent exempt effective advertiser remit including justification. not, helpful 'very impossible' prefer 'reasonable approach' courts. See supra, 3, 277. 13(b) follows: 'Upon proof made, hearing complaint services facilities furnished, burden rebutting prima-facie showing violation affirmatively shown, authorized terminating discrimination: however, furnishing competitor, furnished competitioner.' Callaway Mills sub nom. Bigelow-Sanford Carpet Commerce Clearing Reg.Rep. Transfer Binder, 1963—1965, 16,800; 54 277 (1957); 923 Minneapolis-Honeywell Regulator 44 351 (1948). adds Gerber Beech-Nut Life Savers 160 916 (D.C.S.D.N.Y.1958). For example, wholesaler, witness stated: 'Private nobody trade asa whole haven't much interested (private milk) frankly cents under, wouldn't sell, couldn't away. got $1.50 $2 spread interesting.' show differentiation another. possible, promotion achieve equivalent situation, economically elucidated exclude promotional efforts persons producer activities Jordan, Aspects Dual Distribution Brand Consumer Goods, Cornell L.Q. 394, 406 407 (1965). Chamberlin, Theory Monopolistic Competition 56 (8th 1962): 'A general exists distinguishing (or services) fancied, buyers, leads variety Where exists, slight, buyers paired sellers, nt random (as pure competition), according preferences. 'Differentiation exclusive patented features; trade-marks; names; peculiarities package container, any; singularity color, style. intangible vary 'product' account, less, purchasing along itself.' Brown, Advertising Public Interest: Legal Protection Symbols, 57 Yale L.J. 1165, 1181 (1948): '* buys fabric; pause refreshes, hand lost skill, priceless maker. All illusions, create, creators recoup outlay, poorer? Among many illusions fashion lavishness, refinement, security, romance. Suppose monetary compounding perfume trivial; moment ads promise, believes, romance, seduction, follow use? economist, dour lexicon defines irrational behavior dictated logical pecuniary calculus, illusions; degree kind irrationality man; consuming man grocer testified that: 'People going grocery store pick groceries, majority people something years heard highly advertised. They know fancy best Another 'A. Some say (Borden's) Silver Cow words, maybe coupon side educated won't that. Carnation, don't Pet. 'Q. care price— doctor tells woman baby Pet she wants, you interest her else. You else, you? could.' results house-to-house survey conducted Analysts, indicated selected superior Comparable studies reached conclusion. 'Mom Feels Quality, Ad Cost, Makes Item Costlier, 'Good House' Reports,' Age, 7, 1964, 30. Food Division maintained staff field representatives inspected code-datings cans stores, older off retailer's shelves. dangers storage discoloration precipitation calcium minerals, separation hardening fat precaution defective dispatched wholesalers first-packed, first-shipped rotation plan occasionally high-cost shipments distant plants warehouses. addition, shipment cold warehouse, 'tempered' condensation cans, resulted rust damage labels. candidly stated argument 'The that, Company washes factory door.' misleading. members Laws, Report, Pages 156—159 (1955), However, very discussions Complete Guide 34—35 (1963); (1959), minimal discussion Seidman ambiguous, 427—428 cursory treatments agree, brands. sense disposes concrete Commentators focussed uniformly favor inclusion Differentials Product Differentiation: Issues 66 (1956); 62—76 proper 394 suggestion, accepted Nor whether, dubious 'validate itself' precarious concededly grounded stable engage exhaustive 'physical identity' demonstrates resources adequate Certain reports taken, Judiciary object 'to suppress effectually supported sound positions 7. Senate phrased language. S.R.Rep. 1502, 3. offhand indicates. Prefacing 'I finish my statement. feature. *' predominant enacting abolish notorious infected post-Depression economy, especially immunity discounts evil widespread offering favored rates abortive attempt, vigorously opposed introduce left completely unremedied. 8234—8236 (rejection proposing addition design' 'purchased conditions' clause). 303, 1489; 998, challenged. Inoculator, evidence trading 395, doubtful distinguishable. 958, identical, proved event. Finally, setting case, Fifth Circuit emphasized none affected sold. Universal-Rundle Reg. Rep. 16948, 22003—22005 (F.T.C.Dkt. 8070, June 12, 1964) (differences plumbing fixtures); Quaker Oats 17134, 22215 8112, Nov. 18, flour blends). Compare Edelmann 978 automobile replacement parts); Bruce's Juices, Incorporated American Can 87 895, aff'd 187 919 (C.A.5th Cir.) size juice cans); Champion Spark Plug insulator 'ribs' spark plugs). Comment, Like Quality: Emergence Commercial Standard, Ohio State 294, 296—302 presumption existence General Foods 52 798, 817; Atalanta Trading 53 565, 571. Atalanta, Second evolved emasculation supplier's disregarded.' Corporation 258 365, 371. footnote among considered. 371, 5. 71—72 351, 396—397: accept (the contrary) proposition generally freely undercut competitors'; 277, 302: evident Budweiser St. Louis necessarily normal market'; 16,800, 21755 7634, Feb. 10, 1964): 'Both courts denied shelter (meeting competition) sellers intense demand, normally usually received goods'; Brands, 1485, 1495; Savers, 916, 920, 921—922 (D.C.S.D.N.Y.). Porto Rican Tobacco Rico 234, 237 (C.A.2d refused 'approve construing inconsistently next, advantageous case.' 133, 139. comment Commissioner Mason: 'First finds guilty disregarding popularity goods, same; knock your popular Discriminate Different Purchasers Commodities Grade, Quality Popularity, Proc. Am. Bar Assn. 82, 91—92 (Aug. 1953). Eine Kleine Juristische Schlummergeschichte, Harv.L.Rev. 921, 928—929 (1966). Circuit's ruling concerned primarily supposed arose direct caused midwestern packers expanded Tennessee Carolina include operation, nowhere discusses remand. suggests, 646, remains end, reached. 1385, territorial equation circumstances discrimination. out. Boss Mfg. Payne Glove 71 768, 770—771 (C.A.8th Cir.); 97-99. Adelman, Treated 104 U.Pa.L.Rev. 222, 228—230 Staff Economic Inquiry Marketing, Part II, Frozen Fruit, Juice Vegetable Industry 8, 413 417. concedes requested period covered substantial. 1957, 4,300,000 1,100,000 (government export excluded); net $27,600,000 $5,700,000 respectively. major provided associations retailers, fact, opportunity numbers compete sale One group, accounted 11% volume 1,000 members. availed themselves wholesaler year 600 grocers service area, become regular

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