Court Opinion

ID: 9449630
Source: CourtListenerOpinion
Date Created: 2023-08-04 16:17:26.255543+00
Date Added: 2024-06-11T17:31:54.968911
License: Public Domain

SWYGERT, Circuit Judge
(dissenting).
The hearing examiner found that the additional ten per cent discount granted stocking (limit) jobbers compensates them for maintaining an inventory of Mueller items which are needed by users most frequently, often to meet emergencies; and that this differential in price is no greater than is necessary to reimburse these jobbers for performing a warehousing function. In other words, he found that the price difference is a functional discount representing a reasonable payment for services and facilities actually performed.
While the Commission disputed some of the examiner’s findings on these issues, it is my opinion that the Commission failed entirely in its obligation to clearly show, by citation to the record or otherwise, that the examiner’s findings were in error. See Universal Camera Corp. v. N. L. R. B., 340 U.S. 474, 494, 71 S.Ct. 456, 95 L.Ed. 456 (1951). A reading of the record convinces me that the Commission would have experienced great difficulty in so showing.
The important question, however, is legal rather than factual. This is because the Commission, assuming that the examiner may have been correct on the facts, concludes as a matter of law that Section 2(a) of the Robinson-Pat-man Act has been violated.
In finding a violation, the Commission rejected the view it espoused in Doubleday & Co., 52 F. T. C. 169 (1955):
“In our view, to relate functional discounts solely to the purchaser’s method of resale without recognition of his buying function thwarts competition and efficiency in marketing, and inevitably leads to higher consumer prices. It is possible, for example, for a seller to shift to customers a number of distributional functions which the seller himself ordinarily performs. Such functions should, in our opinion, be recognized and reimbursed. 'Where a businessman performs various wholesale functions, such as providing storage, traveling salesmen and distribution of catalogues, the law should not forbid his supplier from compensating him for such services. Such a legal disqualification mig-ht compel him to render these functions free of charge. The value of the service would then be pocketed by the seller who did not earn it. Such a rule, incorrectly, we think, proclaims as a matter of law that the integrated wholesaler cannot possibly perform the wholesaling function; it forbids the matter to be put to proof.
“On the other hand, the Commission should tolerate no subterfuge. Only to the extent that a buyer actually performs certain functions, assuming all the risks and costs involved, should he qualify for a compensating discount. The amount of the discount should be reasonably related to the expenses assumed by the buyer. It should not exceed the cost of that part of the function he actually performs on that part of the goods for which he performs it.” (at 209.)
The Commission, I believe, should have adhered to that view rather than to have repudiated it.
According to the Commission’s present view, legal recognition cannot be given to the fact that a customer integrates a warehousing function with his selling function and is compensated for so doing by a lower purchase price. The Commission maintains that only the selling characteristics of the customer, i. e., whether wholesaler or retailer, should be considered when setting prices.
This view is contrary to that expressed in Doubleday wherein it was recognized that a purchaser from a producer may perform dual distribution functions *49which may entitle him to be classified, economically and legally, in a category of buyers different from that which perform only a single function.
Labels should yield to realities. When a .buyer performs a distribution function which similar buyers do not perform, he should be allowed to receive reasonable and commensurate compensation for the additional function. In my opinion, the reasons stated in the Report of the Attorney General’s National Committee to Study the Antitrust Laws, 207 (1955), for allowing so-called functional discounts are persuasive and ought be adopted in deciding this case. That Report reads in pertinent part:
*‘[T]o relate discounts or prices solely to the purchaser’s resale activities without recognition of his buying functions thwarts competition and efficiency in marketing. It compels affirmative discrimination against a substantial class of distributors, and hence serves as a penalty on integration. If a businessman actually fulfills the wholesale function by relieving his suppliers of risk, storage, transportation, administration, etc., his performance, his capital investment, and the saving to his suppliers, are unaffected by whether he also performs the retailing function, or any number of other functions. A legal mile disqualifying him from discounts recognizing wholesaling functions actually performed compels him to render these functions free of charge. The value of the service is pocketed by the seller who di.d not earn it. Such a rule proclaims as a matter of law that the integrated wholesaler-retailer cannot possibly perform the wholesaling function; it forbids the matter to be put to proof.”
The General Counsel argues that the Commission recognized that the “limit” jobbers perform warehousing and stocking services which the “regular” jobbers do not perform. It is said for the Commission, however, that if Mueller is to compensate the limit jobbers for these services, it “must follow the terms and conditions specified in Section 2(d).”1
The answer to this argument is that a violation of Section 2(d) is not charged. The Commission apparently recognized from the start that this is not a true Section 2(d) situation and that arguably there may be justification for a difference in discounts between the limit and the regular jobbers. Its election to prosecute a Section 2(a) charge precludes the maintenance of a Section 2(d) charge and conviction which the Commission and its counsel have added (or substituted) by way of hypothesis.
This is an added reason why I am unable to join in the majority opinion which reads into the order (but without directing its modification) the Section 2(d) proviso.
I am aware that the Robinson-Patman Act does not expressly recognize that certain buyers in a class may be additionally compensated for performing extra distribution functions which nor*50mally would be performed by the seller. But neither does it prevent such compensation through a discount in purchasing price which discount reflects a reasonable relationship to the services performed and the facilities furnished the seller, absent any hint of subterfuge. Doubleday, supra. It seems to me that a realistic approach to the marketing situation presented in this case justifies an interpretation of the Act so as to allow jobbers reasonable compensation, by way of an added discount, for performing a distribution function with which Mueller had heretofore been burdened.
I would set aside the Commission’s •order.

. The General Counsel's brief reads in part:
“Petitioner’s sole response to the Commission’s finding that the price discrim-inations ‘subsidize’ the ‘limit’ jobbers’ warehousing of certain products, and so give them a competitive advantage, is that ‘[i]t is ludicrous to suggest that an independent wholesaler will assume the extra burden and cost’ of warehousing petitioner’s products ‘without extra compensation.’ * * * This, however, is not what the Commission is insisting upon. The Commission concedes that this is a perfectly proper procedure, provided it be done in a fair and legal manner. In this connection, the Commission observes * * *, in the words of its General Foods decision, that: “ ‘The law permits the seller to pay for services or facilities furnished in the resale of goods. If he elects to do so, however, the payments must be in accordance with the terms and conditions laid down in Section 2(d). To hold that the rendering of special services ipso facto gives him a separate functional classification would be to read Section 2(d) out of the Act.’” [52 F.T.C. at 825.] (at 53).