FEDERAL TRADE COMMISSION v. MORTON SALT CO.
334 U.S. 37
Argued March 10, 1948 -- Decided May 3, 1948
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SEVENTH CIRCUIT.
A cease-and-desist order issued by the Federal Trade Commission in a proceeding against respondent under the amended Clayton Act, to terminate alleged unlawful price discriminations, 39 F. T. C. 35, was set aside by the Circuit Court of Appeals. 162 F.2d 949. This Court granted certiorari. 332 U.S. 850. Reversed and remanded.
Respondent sells table salt in interstate commerce to wholesalers and retailers on a quantity discount basis. The Federal Trade Commission, after a hearing, found that respondent had discriminated in price between different purchasers of like grades and qualities, in violation of section 2 of the Clayton Act as amended by the Robinson-Patman Act, and issued a cease-and-desist order.
1. Respondent's quantity discounts discriminate in price within the meaning of the Act, and are prohibited where they have the proscribed effect on competition.
2. The legislative history of the Robinson-Patman Act shows that Congress considered it to be an evil that a large buyer could secure a competitive advantage over a small buyer solely because of the former's quantity purchasing power; and the Act was passed to deprive a large buyer of such advantages except to the extent that a lower price could be justified by reason of a seller's diminished costs due to quantity production, delivery or sale, or by reason of the seller's good faith effort to meet the equally low price of a competitor.
3. Under the Act the burden is upon the seller to prove that its quantity discount differentials were justified by cost savings; to establish the existence of a "discrimination in price" in a case involving competitive injury between a seller's customers, the Commission need only prove that the seller has charged one purchaser a higher price for like goods than he has charged one or more of the purchaser's competitors.
4. The Act does not require that the discriminations must in fact have harmed competition, but only that there is a reasonable possibility they may have that effect.
5. The Commission's finding that the competitive opportunities of certain merchants were injured when they had to pay respondent substantially more for their goods than their competitors had to pay constitutes a sufficient showing of injury to competition.
6. The Commission's findings of injury to competition were adequately supported by the evidence.
(a) The evidence that respondent's quantity discounts resulted in price differentials between competing purchasers sufficient in amount to influence their resale price was in itself adequate to support the findings that the effect of such price discriminations "may be substantially to lessen competition . . . and to injure, destroy, and prevent competition."
(b) The evidence was adequate to support the Commission's findings of reasonably possible injury to competition from respondent's price differentials between competing carload and less-than-carload purchasers. Such discounts, like all others, can be justified by a seller who proves that the full amount of the discount is based on his actual savings in cost; but here the respondent failed to make such proof.
(c) The fact that respondent's less-than-carload sales are very small in comparison with the total volume of its business, and the fact that salt is a small item in most wholesale and retail businesses and in consumers' budgets, do not require rejection of the Commission's finding that the effect of the carload discrimination may substantially lessen competition and may injure competition between purchasers who are granted and those who are denied this discriminatory discount.
(d) The possibility that enforcement of the Commission's order might lead respondent to increase prices to its carload purchasers cannot justify refusal of the reviewing court to decree enforcement.
(e) It is self-evident that there is a "reasonable possibility" that competition may be adversely affected by a practice whereby manufacturers and producers sell their goods to some customers substantially cheaper than they sell like goods to competitors of such customers.
7. With the exception of certain provisos which this Court rejects, the cease-and-desist order of the Commission is sustained.
(a) The Commission's order, so far as here approved, is specifically aimed at the pricing practices found unlawful, and is neither too broad nor contrary to the principle of Labor Board v. Express Publishing Co., 312 U.S. 426.
(b) Provisions of the order which forbid respondent from selling its product, regardless of quantities, to some wholesalers and retailers at a price different from that which it charged competing wholesalers and retailers for the same grade, are here approved.
(c) Provisos permitting 5-cents-per-case differentials if they do not "tend to lessen, injure, or destroy competition" are here rejected because the qualifying clause tends to shift to the courts a responsibility in enforcement proceedings which Congress has primarily entrusted to the Commission.
(d) Section 2 (a) of the Act authorizes a provision of the order forbidding sales by respondent to any retailer at prices lower than those charged wholesalers whose customers compete with such retailer.
8. On remand of the cause, the Commission should have an opportunity to reconsider the provisos in its order which permit 5-cents-per-case differentials in the light of this Court's rejection of the qualifying clauses, and to refashion these provisos as may be deemed necessary.
162 F.2d 949, reversed.
Mr. Justice Black delivered the opinion of the Court.
Mr. Justice Jackson, with whom Mr. Justice Frankfurter joins, dissenting in part.