346 U.S.

61
73 S.Ct. 1017
97 L.Ed. 1454

AUTOMATIC CANTEEN CO. OF AMERICA

v.
FEDERAL TRADE COMMISSION.
No. 89.
Argued Dec. 12 and 15, 1952.
Decided June 8, 1953.

Mr. Edward F. Howrey, Washington, D.C., for petitioner.

Mr. Robert B. Dawkins, Washington D.C., for respondent.
Mr. Justice FRANKFURTER delivered the opinion of the Court.

The Robinson-Patman Act, 15 U.S.C.A. 13 et seq., directed primarily against

sellers who discriminate in favor of large buyers, includes a provision under
which proceedings may be had against buyers who knowingly induce or receive
discriminatory prices. That provision, 2(f) of the Act, is here for construction
for the first time as a result of a complaint issued by the Federal Trade
Commission against petitioner, a large buyer of candy and other confectionary
products for resale through 230,000-odd automatic vending machines operated
in 33 States and the District of Columbia. Petitioner, incorporated in 1931, has
enjoyed rapid growth and has attained, so we are told, a dominant position in
the sale of confectionary products through vending machines.

The Commission introduced evidence that petitioner received, and in some

instances solicited, prices it knew were as much as 33% Lower than prices
quoted other purchasers, but the Commission has not attempted to show that the
price differentials exceeded any cost savings that sellers may have enjoyed in
sales to petitioner. Petitioner moved to dismiss the complaint on the ground that
the Commission had not made a prima facie case. This motion was denied; the
Commission stated that a prima facie case of violation had been established by
proof that the buyer received lower prices on like goods than other buyers, 'well
knowing that it was being favored over competing purchasers,' under

circumstances where the requisite effect on competition had been shown. The
question whether the price differentials made more than due allowance for cost
differentials did not need to be decided 'at this stage of the proceeding.' On
petitioner's failure to introduce evidence, the Commission made findings that
petitioner knew the prices it induced were below list prices and that it induced
them without inquiry of the seller, or assurance from the seller, as to cost
differentials which might justify the price differentials. The Commission
thereupon entered a cease and desist order. 46 F.T.C. 861. On review, the Court
of Appeals affirmed,1 holding that the Commission's prima facie case under
2(f) does not require showing absence of a cost justification. 194 F.2d 433.
3

Section 2(f) of the Robinson-Patman Act, roughly the counterpart, as to buyers,

of sections of the Act dealing with discrimination by sellers, is a vital
prohibition in the enforcement scheme of the Act. In situations where buyers
may have difficulty in proving their sellers' costs, 2(f) could, if the
Commission's view in this case prevails, become a major reliance for simplified
enforcement of the Act not only by the Commission but by plaintiffs suing for
treble damages. Such enforcement, however, might readily extend beyond the
prohibitions of the Act and, in doing so, help give rise to a price uniformity and
rigidity in open conflict with the purposes of other antitrust legislation. We
therefore thought it necessary to grant certiorari. 344 U.S. 809, 73 S.Ct. 16.

Enforcement of the Clayton Act's original declaration against price

discrimination was so frustrated by inadequacies in the statutory language that
Congress in 1936 enacted the sweeping amendments to that Act contained in
what is known as the Robinson-Patman Act. 49 Stat. 1526, 15 U.S.C. 13, 15
U.S.C.A. 13. Chief among the inadequacies had been express exemption of
price discrimination in the sales of different quantities of like goods, an
exemption that was interpreted as leaving quantity-discount sellers free to grant
discounts to quantity buyers that exceeded any cost savings in selling to such
buyers. Goodyear Tire & Rubber Co. v. F.T.C., 6 Cir., 101 F.2d 620. In an
effort to tighten the restriction against price discrimination inimical to the
public interest, Congress enacted two provisions bearing on the issues in this
case. 2 It made price discrimination in the sale of like goods unlawful without
regard to quantity, although quantity discounts, like other price differentials,
could still be justified if they made 'no more than due allowance' for cost
differences in sales to different buyers. Congress in addition sought to reach the
large buyer, capable of exerting pressure on smaller sellers by making it
unlawful 'knowingly to induce or receive a discrimination in price which is
prohibited by this section.'

Since precision of expression is not an outstanding characteristic of the

Robinson-Patman Act, exact formulation of the issue before us is necessary to

avoid inadvertent pronouncement on statutory language in one context when
the same language may require separate consideration in other settings.
Familiar but loose language affords too ready a temptation for comprehensive
but loose construction. We therefore think it imperative in this case to confine
ourselves as much as possible to what is in dispute here.
6

We are here asked to settle a controversy involving simply the burden of

coming forward with evidence under 2(f) of the Act. The record, so abundant
in its instances of individual transactions that the Commission itself felt bound
to animadvert on undue proliferation of the evidence by Government lawyers,3
may be taken as presenting varying degrees of bargaining pressure exerted by a
buyer on a seller to obtain prices below those quoted other purchasers. In some
instances, so the Commission found, petitioner's method was to 'inform
prospective suppliers of the prices and terms of sale which would be acceptable
to (petitioner) without consideration or inquiry as to whether such supplier
could justify such a price on a cost basis or whether it was being offered to
other customers of the supplier.' 46 F.T.C., at 888. A typical instance of the
maximum pressure found by the Commission was a series of negotiations in
which representatives of petitioner sought to explain to a prospective supplier
the kind of savings he might enjoy in sales to petitioner and might make the
basis of a price differential. In such instances, petitioner sometimes gave the
supplier estimates of what it considered 'representative' percentage savings on
various costs such as freight, sales costs, packaging, and returns and
allowances.4

The Commission made no finding negativing the existence of cost savings or

stating that whatever cost savings there were did not at least equal price
differentials petitioner may have received. It did not make any findings as to
petitioner's knowledge of actual cost savings of particular sellers and found
only, as to knowledge, that petitioner knew what the list prices to other buyers
were. Petitioner, for its part, filed offers of proof that many sellers would testify
that they had never told petitioner that the price differential exceeded cost
savings. An offer of proof was in turn made by the Commission as to the
testimony of these sellers on cross-examination; such proof would have brought
out that petitioner never inquired of its suppliers whether the price differential
was in excess of cost savings, never asked for a written statement or affidavit
that the price differentials did not exceed such savings, and never inquired
whether the seller had made up 'any exact cost figures' showing cost savings in
serving petitioner.

Petitioner claims that the Commission has not, on this record, made a prima

facie case of 'knowing inducement of prices that made more than due
allowance for cost differences,' while the Commission contends that it has
established a prima facie case, justifying entry of a cease and desist order where
the buyer fails to introduce evidence. Before proceeding to an examination of
the statutory provisions, it is desirable to consider the kind of evidence about
which this dispute centers. Petitioner is saying in effect that under the
Commission's view, the burden of introducing evidence as to the seller's cost
savings and the buyer's knowledge thereof is put on the buyer; this burden,
petitioner insists, is so difficult to meet that it would be unreasonable to
construe the language Congress has used as imposing it. If so construed, the
statute, petitioner contends, would create a presumption so lacking rational
connection with the fact established as to violate due process.
9

We have been invited to consider in this connection some of the intricacies

inherent in the attempt to show costs in a Robinson-Patman Act proceeding.
The elusiveness of cost data, which apparently cannot be obtained from
ordinary business records, is reflected in proceedings against sellers.5 Such
proceedings make us aware of how difficult these problems are, but this record
happily does not require us to examine cost problems in detail. It is sufficient to
note that, whenever costs have been in issue, the Commission has not been
content with accounting estimates; a study seems to be required, involving
perhaps stop-watch studies of time spent by some personnel such as salesmen
and truck drivers, numerical counts of invoices or bills and in some instances of
the number of items or entries on such records, or other such quantitative
measurement of the operation of a business.6 What kind of proof would be
required of a buyer we do not know. The Commission argues that knowledge
generally available to the buyer from published data or experience in the trade
could be used by petitioner to make a reasonable showing of his sellers' costs.
There was no suggestion in the Commission's opinion, however, that it would
take a different attitude toward cost showings by a buyer than it has taken with
respect to sellers, and 'general knowledge of the trade,' to use the Commission's
phrase, unsupported by factual analysis has as yet been far from acceptable, and
indeed has been strongly reproved by Commission accountants, as the basis for
cost showings in other proceedings before the Commission.7

10

No doubt the burden placed on petitioner to show his sellers' costs, under
present Commission standards, is heavy. Added to the considerable burden that
a seller himself may have in demonstrating costs is the fact that the data not
only are not in the buyer's hands but are ordinarily obtainable even by the seller
only after detailed investigation of the business. A subpoena of the seller's
records is not likely to be adequate. It is not a question of obtaining information
in the seller's hands.8 It is a matter of studying the seller's business afresh.

Insistence on proof of costs by the buyer might thus have other implications; it
would almost inevitably require a degree of cooperation between buyer and
seller, as against other buyers, that may offend other antitrust policies, and it
might also expose the seller's cost secrets to the prejudice of arm's-length
bargaining in the future. Finally, not one but, as here, approximately 80
different sellers' costs may be in issue.
11

It is against this background that the present dispute arises. The legislative
setting indicates congressional recognition of the need to charge buyers with a
responsibility for price discrimination comparable, so far as possible, to that
placed on sellers. Thus, at the least, we can be confident in reading the words in
2(f), 'a discrimination in price which is prohibited by this section', as a
reference to the substantive prohibitions against discrimination by sellers
defined elsewhere in the Act.9 It is therefore apparent that the discriminatory
price that buyers are forbidden by 2(f) to induce cannot include price
differentials that are not forbidden to sellers in other sections of the Act, and,
what is pertinent in this case, a buyer is not precluded from inducing a lower
price based on cost differences that would provide the seller with a defense.
This reading is, indeed, not seriously disputed by the parties. For we are not
dealing simply with a 'discrimination in price';10 the 'discrimination in price' in
2(f) must be one 'which is prohibited by this section.' Even if any price
differential were to be comprehended within the term 'discrimination in price',
2(f), which speaks of prohibited discriminations, cannot be read as declaring
out of bounds price differentials within one or more of the 'defenses' available
to sellers, such as that the price differentials reflect cost differences, fluctuating
market conditions, or bona fide attempts to meet competition, as those defenses
are set out in the provisos of 2(a) and 2(b).

12

This is not to say, however, that the converse follows, for 2(f) does not reach
all cases of buyer receipt of a prohibited discrimination in prices. It limits itself
to cases of knowing receipt of such prices. The Commission seems to argue, in
part, that the substantive violation occurs if the buyer knows only that the
prices are lower than those offered other buyers. Such a reading not only
distorts the language but would leave the word 'knowingly' almost entirely
without significance in 2(f). A buyer with no knowledge whatsoever of facts
indicating the possibility that price differences were not based on cost
differences would be liable if in fact they were not. We have seen above that
2(f) does not refer to all price differentials. But we do not think that price
differentials, even as a matter of uncritical impression, come so often within the
prohibited range of price discriminations that the language can in any way be
read one way for some purposes and another in relation to the word
'knowingly.'

13

The Commission's attempts in this case to limit the word 'knowingly' to a more
reasonable area of prohibition are not, we think, justified by the language
Congress has used. The Commission argues that Congress was attempting to
reach buyers who through their own activities obtain a special price and that
'knowingly to induce or receive' can be read as charging such buyers with
responsibility for whatever unlawful prices result. But that argument would
comprehend any buyer who engages in bargaining over price. If the
Commission means buyers who exert undue pressure, the argument might find
greater support in the legislative background but less in the language Congress
has employed. Such a reading not only ignores the word 'receive' but opens up
even more entangling difficulties with interpretation of what is undue
pressure.11

14

The Commission also urges, from legislative explanation of similar language in

2(a), that the word 'receive' can in some way be limited to a continued and
systematic receipt of lower prices that could fairly charge the recipient with
knowledge of illegality.12 While we need not decide whether systematic receipt
of prices in itself could ever be sufficient to give the buyer the requisite
knowledge,13 we think, as the argument itself recognizes, that the inquiry must
be into the buyer's knowledge of the illegality.

15

Not only are the arguments of the Commission unsatisfying, but we think a
fairer reading of the language and of what limited legislative elucidation we
have points toward a reading of 2(f) making it unlawful only to induce or
receive prices known to be prohibited discriminations.14 For 2(f) was
explained in Congress as a provision under which a seller, by informing the
buyer that a proposed discount was unlawful under the Act could discourage
undue pressure from the buyer.15 Of course, such devices for private
enforcement of the Act through fear of prosecution could equally well have
been achieved by providing that the buyer would be liable if, through the seller
or otherwise, he learned that the price he sought or received was lower than that
accorded competitors, but we are unable, in the light of congressional policy as
expressed in other antitrust legislation, to read this ambiguous language as
putting the buyer at his peril whenever he engages in price bargaining. Such a
reading must be rejected in view of the effect it might have on that sturdy
bargaining between buyer and seller for which scope was presumably left in the
areas of our economy not otherwise regulated.16 Although due consideration is
to be accorded to administrative construction where alternative interpretation is
fairly open, it is our duty to reconcile such interpretation, except where
Congress has told us not to, with the broader antitrust policies that have been
laid down by Congress. Even if the Commission has, by virtue of the
Robinson-Patman Act, been given some authority to develop policies in

conflict with those of the Sherman Act, 15 U.S.C.A. 17, 15 note, in order
to meet the special problems created by price discrimination, we cannot say that
the Commission here has adequately made manifest reasons for engendering
such a conflict so as to enable to accept its conclusion. Cf. Eastern-Central
Motor Carriers Ass'n v. United States, 321 U.S. 194, 211212, 64 S.Ct. 499,
507508, 88 L.Ed. 668.
16

We therefore conclude that a buyer is not liable under 2(f) if the lower prices
he induces are either within one of the seller's defenses such as the cost
justification or not known by him not to be within one of those defenses. This
conclusion is of course only a necessary preliminary in this case. As we have
noted earlier, the precise issue in the case before us is the burden of introducing
evidencea separate issue, though of course related to the substantive
prohibition. This issue, involving as it does some of the same considerations,
requires as further to consider a balance of convenience in the light of whatever
evidentiary rules Congress has laid down for proceedings under the Act.
Assuming, as we have found, that there is no substantive violation if the buyer
did not know that the prices it induced or received were not cost-justified, we
must in this case determine whether proof that the buyer knew that the price
was lower is sufficient to shift the burden of introducing evidence to the buyer.

17

The Commission, in support of its position that it need only show the buyer's
knowledge that the prices were lower, employs familiar interpretative tools
without adequate regard to their immediate serviceability. It labels a seller's
defense, such as the cost-justification, as an 'exception to the general
prohibition' and from this argues that under conventional rules of evidence the
Commission need come forward with evidence of violation only of the 'general
prohibition.' This interpretation has foundation in the many commonsensical
readings of comparable prohibitions so as to put the burden of showing a
justification on the one who claims its benefits. We have said as much even in
connection with that part of 2(b) of the Robinson-Patman Act which attempts
to lay down the rules of evidence under the Act.17 That section provides, 'Upon
proof being made * * * that there has been discrimination on price * * * the
burden of rebutting the prima-facie case thus made by showing justification
shall be upon the person charged with a violation of this section'. The
Commission points out that it was under this section that we held in the Morton
Salt case that the burden of showing a cost-justification is on the seller in a
2(a) proceeding, and argues that the same burden is on the buyer. It argues that
the 'prima-facie case thus made' clearly refers back to 'proof (of) discrimination
in price' and thus, from our decision in Morton Salt, that the prima facie case of
a prohibited discrimination to which 2(b) refers consists only of proof of a
difference in prices in the sale of like goods having the requisite effect on

competition. Saying that 2(f) differs from 2(a) 'only in containing the
express requirement that the buyer shall have 'knowingly' induced or received
such price discriminations,' the Commission asks us to hold that a prima facie
case under 2(f), is made out with a showing of the prima facie case of 2(a)
violation 'plus the additional element of having induced or received such
discrimination with knowledge of the facts which made it violative of Section
2(a).'
18

We need not concern ourselves with the Commission's interpretation of the

words 'prima-facie case thus made' in 2(b) and the resulting conclusion that if
2(a) and 2(f) are to be read as counterparts, the elements necessary for a
prima facie case under 2(a) are sufficient for a prima facie showing of the
'discrimination in price which is prohibited by this section' in 2(f). However
that may be, the Commission recognizes that there is an 'additional element'
resulting from the word 'knowingly' in 2(f), and, of course, it is that element
about which the controversy here centers and to which we must address
ourselves. We may, however, note in passing that consistency between 2(a)
and 2(f) both as to what constitutes the prohibited 'discrimination in price' and
as to the elements of a prima facie showing of the prohibited 'discrimination in
price' would not be disturbed by a holding against the Commission in this case,
for we are concerned here with the prima facie showing of knowledge,
admittedly an independent and separate requirement of 2(f) above and beyond
that of 2(a).

19

The Commission argues that a prima facie case of knowledge is made out when
it is shown that the buyer knew the facts making the price differential violative
of 2(a). At another point it urges that it must now show only 'that the buyer
affirmatively contributed to obtaining the discriminatory prices by special
solicitation, negotiation or other action taken by him.' However the argument is
phrased, the Commission is, on this record, insisting that once knowledge of a
price differential is shown,18 the burden of introducing evidence shifts to the
buyer. The Commission's main reliance in this argument is 2(b), which, as we
have stated above, we interpreted in the Morton Salt case as putting the burden
of coming forward with evidence of a cost justification on the seller, on the
one, that is, who claimed the benefits of the justification.

20

To this it is answered that although 2(b) does speak not of the seller but of the
'person charged with a violation of this section,' other language in 2(b) and its
proviso seems directed mainly to sellers,19 that the legislative chronology of the
various provisions ultimately resulting in the Robinson-Patman Act indicates
that 2(b) was drafted with sellers in mind, and that the few cases so far
decided have dealt only with sellers.

21

A confident answer cannot be given; some answer must be given. We think we

must read the infelicitous language of 2(b) as enacting what we take to be its
purpose, that of making it clear that ordinary rules of evidence were to apply in
Robinson-Patman Act proceedings.20 If 2(b) is to apply to 2(f) although we
do not decide that it does because we reach the same result without it we think
it must so be read. Considerations of fairness and convenience operative in
other proceedings must, we think, have been controlling in the drafting of
2(b), for it would require far clearer language than we have here to reach a
contrary result. Cf. Addison v. Holy Hill Fruit Products, 322 U.S. 607, 617
618, 64 S.Ct. 1215, 1221, 88 L.Ed. 1488. If that is so, however, decisions
striking the balance of convenience for Commission proceedings against sellers
are beside the point.21 And we think the fact that the buyer does not have the
required information, and for good reason should not be required to obtain it,
has controlling importance in striking the balance in this case. This result most
nearly accommodates this case to the reasons that have been given by judges
and legislators for the rule of 2(b), that is, that the burden of justifying a price
differential ought to be on the one who 'has at his peculiar command the cost
and other record data by which to justify such discriminations.'22 Where, as
here, such considerations are inapplicable, we think we must disregard
whatever contrary indications may be drawn from a merely literal reading of
the language Congress has used. It would not give fair effect to 2(b) to say
that the burden of coming forward with evidence as to costs23 and the buyer's
knowledge thereof shifts to the buyer as soon as it is shown that the buyer knew
the prices differed. Certainly the Commission with its broad power of
investigation and subpoena, prior to the filing of a complaint, is on a better
footing to obtain this information than the buyer. Indeed, though it is of course
not for us to enter the domain of the Commission's discretion in such matters,
the Commission may in many instances find it not inconvenient to join the
offending seller in the proceedings.

22

If the requirement of knowledge in 2(f) has any significant function, it is to

indicate that the buyer whom Congress in the main sought to reach was the one
who, knowing full well that there was little likelihood of a defense for the
seller, nevertheless proceeded to exert pressure for lower prices. Enforcement
of the provisions of 2(f) against such a buyer should not be difficult. Proof of
a cost justification being what it is, too often no one can ascertain whether a
price is cost-justified. But trade experience in a particular situation can afford a
sufficient degree of knowledge to provide a basis for prosecution. By way of
example a buyer who knows that he buys in the same quantities as his
competitor and is served by the seller in the same manner or with the same
amount of exertion as the other buyer can fairly be charged with notice that a
substantial price differential cannot be justified. The Commission need only to

show, to establish its prima facie case, that the buyer knew that the methods by
which he was served and quantities in which he purchased were the same as in
the case of his competitor. If the methods or quantities differ, the Commission
must only show that such differences could not give rise to sufficient savings in
the cost of manufacture, sale or delivery to justify the price differential, and that
the buyer, knowing these were the only differences, should have known that
they could not give rise to sufficient cost savings. The showing of knowledge,
of course, will depend to some extent on the size of the discrepancy between
cost differential and price differential, so that the two questions are not isolated.
A showing that the cost differences are very small compared with the price
differential and could not reasonably have been thought to justify the price
difference should be sufficient.
23

What other circumstances can be shown to indicate knowledge on the buyer's

part that the prices cannot be justified we need not now attempt to illustrate;24
but surely it will not be an undue administrative burden to explain why other
proof may be sufficient to justify shifting the burden of introducing evidence
that the buyer is or is not an unsuspecting recipient of prohibited
discriminations. We think, in any event, it is for the Commission to spell out
the need for imposition of such a harsh burden of introducing evidence as it
appears to have sought in this case. Certainly we should have a more solid basis
than an unexplained conclusion before we sanction a rule of evidence that
contradicts antitrust policy and the ordinary requirements of fairness. While this
Court ought scrupulously to abstain from requiring of the Commission
particularization in its findings so exacting as to make this Court in effect a
court of review on the facts, it is no less important, since we are charged with
the duty of reviewing the correctness of the standards which the Commission
applies and the essential fairness of the mode by which it reaches its
conclusions, that the Commission do not shelter behind uncritical generalities
or such looseness of expression as to make it essentially impossible for us to
determine what really lay behind the conclusions which we are to review. Cf.
United States v. Chicago, M., St. P. & P.R. Co., 294 U.S. 499, 510511, 55
S.Ct. 462, 467, 79 L.Ed. 1023.

24

Because of our view of the balance of convenience in these circumstances, we

do not reach petitioner's claim that the Commission is in effect saying that
knowledge of a difference in prices creates a presumption of knowledge that the
price was unlawful, a presumption it claims would fall for lack of rational
connection under Tot v. United States, 319 U.S. 463, 63 S.Ct. 1241, 87 L.Ed.
1519. Cf. Note, E(dmund) M. M(organ), 56 Harv.L.Rev. 1324. It has seemed to
us unnecessary in this case to speak of presumptions, and we need only call
attention to the fact that in this case, as in the Tot case, we have dealt only with

the burden of introducing evidence and not with the burden of persuasion, as to
which different considerations may apply.
25

The judgment of the Court of Appeals, accordingly, is reversed as to the

charges in Count II of the complaint (Count I is not before us), and the case is
remanded to that court with instructions to remand it to the Federal Trade
Commission for such further action as is open under this opinion. It is so
ordered.

26

Reversed and remanded with instructions.

27

Mr. Justice DOUGLAS, with whom Mr. Justice BLACK and Mr. Justice
REED concur, dissenting.

28

This decision is a graphic illustration of the way in which a statute can read
with enervating effect.

29

Section 2(b) of the Clayton Act, 38 Stat. 730, as amended by the RobinsonPatman Act, 49 Stat. 1526, 15 U.S.C. 13(b), 15 U.S.C.A. 13(b), provides
that where proof is made that there has been 'discrimination in price or services
or facilities furnished, the burden of rebutting the prima-facie case thus made
by showing justification shall be upon the person charged with a violation of
this section, and unless justification shall be affirmatively shown, the
Commission is authorized to issue an order terminating the discrimination * *
*.' (Italics added.)

30

Section 2(f) makes it unlawful 'for any person' engaged in commerce

'knowingly to induce or receive a discrimination in price which is prohibited by
this section.' (Italics added.)

31

The words 'the person charged' as used in 2(b) and the words 'any person'
used in 2(f) plainly include buyers as well as sellers.

32

The nature of the discrimination condemned is made clear in 2(a). It outlaws

discrimination 'in price between different purchasers of commodities of like
grade and quality' where the effect is substantially to prevent or lessen
competition or tend to create a monopoly as respects any person 'who either
grants or knowingly receives the benefit of such discrimination'. But it permits
price differentials 'which make only due allowance for differences in the cost of
manufacture, sale, or delivery resulting from the differing methods or

quantities' in which the commodities are sold or delivered.

33

In the present case, the Court determines that even though a 'buyer knew that
the price was lower', such knowledge is insufficient to 'shift the burden of
introducing evidence to the buyer.' But 2(b) requires the person shown to
practice a discrimination to establish a justification. Section 2(f) was intended
to make clear that the same bans and burdens are on a knowing buyer obtaining
discriminatory prices as we held in Federal Trade Commission v. A. E. Staley
Mfg. Co., 324 U.S. 746, 759760, 65 S.Ct. 971, 977, 89 L.Ed. 1338, approved
in Standard Oil Co. v. Federal Trade Commission, 340 U.S. 231, 71 S.Ct. 240,
95 L.Ed. 239, are on a knowing seller who grants them.

34

The record shows persistent and continuous efforts of this large buyer in
wheedling and coercing suppliers into granting it discriminatory prices. The
Commission summarized petitioner's activities in far more sedate terms than
their bizarre nature justified:

35

'Respondent used various methods to induce its suppliers to grant

discriminatory prices. One of these was to inform prospective suppliers of the
prices and terms of sale which would be acceptable to the respondent without
consideration or inquiry as to whether such supplier could justify such a price
on a cost basis or whether it was being offered to other customers of the
supplier. At other times the respondent refused to buy unless the price to it was
reduced below prices at which the particular supplier sold the same
merchandise to others. In other instances respondent sought to explain to the
prospective supplier that certain alleged savings would accrue to the supplier in
selling to respondent or that certain elements of the supplier's cost could be
eliminated, which would, in respondent's opinion, justify a lower price. In
carrying out this form of inducement, respondent would advise a supplier or
prospective supplier of the price which it considered 'standard price.' In letters
written to the Curtiss Candy Company on November 15, 1939, and to W. F.
Schrafft & Sons Corporation on February 15, 1937, respondent summarized
alleged savings to these companies as follows:

Curtiss Schrafft
" Alleged Savings Co. Corp.
36
37

(1) Freight savings of...... 6%. 5% to 7%

38

(2) Sales cost savings of... 7%. 7%

39

(3) 24-count cartons savings of. 5%. 5%

40

(4) Return and allowances savings of. 1%. 1% to 2%

41

(5) Free deals and samples

42

savings of 8%..... 2% to X%

43

(6) Shipping containers savings of. ..... 1% to 2%

44

Total deductions......... 27%. 21% to 25%•

45

'Respondent advised these companies that such alleged savings could be made
because of the method by which respondent made purchases and because
certain services could be eliminated in selling of it.'

46

There is no doubt that the large buyers wield clubs that give them powerful
advantages over the small merchants. Often large merchants gain advantages
over other sellers of the same merchandise by obtaining price concessions by
pressure on their suppliers. The evil was acknowledged in Federal Trade
Commission v. Morton Salt Co., 334 U.S. 37, 43, 68 S.Ct. 822, 826, 92 L.Ed.
1196. The Congress plainly endeavored to curb the buyer in the kind of
activities disclosed by this record. As the House Report reveals, the line sought
to be drawn was between those who incidentally receive discriminatory prices
and those who actively solicit and negotiate them. H.R.Rep. No. 2951, 74th
Cong., 2d Sess., pp. 56.

47

The Court disregards this history. The Court's construction not only requires the
Commission to show that the price discriminations were not justified; it also
makes the Commission prove what lay in the buyer's mind. I would let the acts
of the buyer speak for themselves. Where, as here, the buyer undertakes to
bludgeon sellers into prices that give him a competitive advantage, there is no
unfairness in making him show that the privileges he demanded had cost
justifications. This buyer over and again held itself out as a cost expert.* I
would hold it to its professions. Since it was the coercive influence, there is no
unfairness in making it go forward with evidence to rebut the Commission's
prima facie case.

The Court also granted enforcement of the order on a cross petition by the

Commission. The Commission concedes the impropriety of this action under

our decision in Federal Trade Commission v. Ruberoid Co., 343 U.S. 470, 72
S.Ct. 800, 96 L.Ed. 1081, rendered after the decision of the Court of Appeals in
the case now before us. In view of this concession, we assume that the Court of
Appeals, on the remand of this case, will, without further direction, reconsider
its order for enforcement.
2

The two prohibitions are as follows:

'Sec. 2. (a) That it shall be unlawful for any person engaged in commerce, in
the course of such commence, either directly or indirectly, to discriminate in
price between different purchasers of commodities of like grade and quality,
where either or any of the purchases involved in such discrimination are in
commerce, where such commodities are sold for use, consumption, or resale
within the United States or any Territory thereof or the District of Columbia or
any insular possession or other place under the jurisdiction of the United States,
and where the effect of such discrimination may be substantially to lessen
competition or tend to create a monopoly in any line of commerce, or to injure,
destroy, or prevent competition with any person who either grants or knowingly
receives the benefit of such discrimination, or with customers of either of them:
Provided, That nothing herein contained shall prevent differentials which make
only due allowance for differences in the cost of manufacture, sale, or delivery
resulting from the differing methods or quantities in which such commodities
are to such purchasers sold or delivered: * * *.'
(The other provisos of 2(a), not relevant here, concern the grant of authority
to the Commission to establish quantity limits, recognition of the seller's right
to select his customers under certain conditions, and exemption of price
changes made in response to changing market conditions.)
'(f) That it shall be unlawful for any person engaged in commerce, in the course
of such commerce, knowingly to induce or receive a discrimination in price
which is prohibited by this section.'

The Commission recognized the need, common in antitrust litigation, for care
on the part of the prosecuting officers not to overburden the record. 'The record
in this case does not disclose the reason for such a plethora of cumulative
evidence as was adduced by Government counsel in the instant matter. Neither
harassment of litigants nor the waste of Government funds in needless
reiteration through cumulative evidence should be countenanced, nor does it
seem that it was necessary to name 14 sellers as typical of a group from which
respondents had induced or received discriminations in price, and certainly the
records of not more than 5 of such sellers would have supplied ample evidence

of such discriminations or price differentials.' In re Automatic Canteen Co. of

America, 46 F.T.C. 861, 892. Failure to limit the evidence in some such way to
typical transactions would create an especially heavy burden in a proceeding
against a buyer under 2(f) such as that here, where discriminatory sales were
alleged to have been made by about 80 of the buyer's 115 suppliers.
4

Although the Commission recited such instances, it did not relate them to what
the buyer should have known as to costs. It did not find from such instances
that the circumstances should have provoked inquiry in the mind of a prudent
business man. In short, we do not have a case in which the Commission in its
informed judgment was led to conclude that in the circumstances knowing
acceptance or inducement of a preference justified an inference of knowledge as
to costs.

For a collection of relevant authorities and secondary material available on cost

showings under the Act, see Note, 65 Harv.L.Rev. 1011. See also Fuchs, The
Requirement of Exactness in the Justification of Price and Service Differentials
under the Robinson-Patman Act, 30 Tex.L.Rev. 1; Haslett, Price
Discriminations and their Justifications under the Robinson-Patmant Act of
1939, 46 Mich.L.Rev. 450, 472; Sawyer, Accounting and Statistical Proof in
Price Discrimination Cases, 36 Iowa L.Rev. 244. For discussion of specific cost
cases under the Act, see Aronson, Defendants under the Robinson-Patman Act,
in Business and the Robinson-Patman Law (Werne ed.), 212, 227; Taggart, The
Cost Principle in Minimum Price Regulation, 110, 8 Mich.Bus.Studies 151, 260
(1938); Warmack, Cost Accounting Problems under the Robinson-Patman Act,
CCH Robinson-Patman Act Symposium (1947) 105; Comment, 35 Ill.L.Rev.
60.

Federal Trade Commission rulings in some cost cases 'demonstrate that expert
testimony and other evidence extrinsic to an actual cost analysis will be given
little weight by the Commission. The FTC apparently believes that such
materials lack the objectivity and relevance of the approved method of
analysis.' Note, 65 Harv.L.Rev. 1011, 10131014. 1014. See also Warmack,
supra, note 5. Compare In re Minneapolis-Honeywell Regulator Co., 44 F.T.C.
351, 394, a case in which 'an extensive cost study' resulting from 'sincere and
extensive efforts' was in part accepted.

See, e.g., Warmack, supra, note 5, at 107, 110.

Cf. Longman, Distribution Cost Analysis, 250, and articles cited supra, note 5.

See, e.g., 80 Cong.Rec. 6428, 9419; H.R.Rep.No. 2951, 74th Cong., 2d Sess. 8.

10

Were that the case, it might strictly be argued that the seller's 'defenses' are not

relevant in a 2(f) proceeding and that what is prohibited is the knowing

inducement or receipt of a price lower than that accorded competing buyers.
Such an interpretation has ambiguous legislative support. Congressman
Utterback, in submitting the conference report to the House, stated, '* * * a
discrimination is more than a mere difference. Underlying the meaning of the
word is the idea that some relationship exists between the parties to the
discrimination which entitles them to equal treatment, whereby the difference
granted to one casts some burden or disadvantage upon the other.' 80 Cong.Rec.
9416. Plainly enough, under this statement, a discrimination in price may mean
either a price differential in sales to two competitors, or a price differential in
sales to two competitors which, because of an absence of cost or other
justification, puts the unfavored competitor at a disadvantage. Compare Haslett,
supra, note 5, at 453466, with McAllister, Price Control by Law in the
United States, 4 Law & Contemp.Prob. 273, 291. In any event, controversy
over the meaning of the isolated phrase 'discrimination in price' is beside the
point here.
11

Time and again there was recognition in Congress of a freedom to adopt and
pass on to buyers the benefits of more economical processes, see, e.g.,
H.R.Rep.No. 2287, 74th Cong., 2d Sess. 10, 17; 80 Cong.Rec. 9415, 9417;
buyer pressure to obtain the benefits of such savings could certainly not be
undue pressure. Cf. Edwards, Maintaining Competition, 161. The
Commission's findings do not suggest such a discrepancy in bargaining position
between this buyer and his suppliers as to warrant characterizing the buyer as
'bludgeoning.' The Commission did find that those on whom the greatest
'pressure' was exerted were such not inconsiderable candy manufacturers as the
Curtiss Candy Co. and W. F. Schrafft & Sons Corp.

12

See H.R.Rep.No. 2951, 74th Cong., 2d Sess. 56, explaining the language in
2(a) quoted supra, note 2, 'or prevent competition with any person who either
grants or knowingly receives the benefit of such discrimination,' as follows: The
purpose of the addition of the word 'knowingly' 'is to exempt from the meaning
of the surrounding clause those who incidentally receive discriminatory prices
in the routine course of business without special solicitation, negotiation, or
other arrangement for them on the part of the buyer or seller, and who are
therefore not justly chargeable with knowledge that they are receiving the
benefit of such discrimination.' The context in which this explanation was
given, as well as the precise language, so differs from 2(f) that this
interpretation does not present a contradiction between it and our reading of
2(f).

13

See 346 U.S. 80, 81, 73 S.Ct. 1027, 1028, post.

14

15

We of course do not, in so reading 2(f), purport to pass on the question

whether a 'discrimination in price' includes the prohibitions in such other
sections of the Act as 2(d) and 2(e).
Congressman Utterback, in presenting the conference report to the House,
spoke quite clearly in terms indicating that the provisions of 2(f)
contemplated only the buyer who knew that the price was not justified by costs.
Section 2(f) 'makes it easier (for the manufacturer) to resist the demand for
sacrificial price cuts coming from mass-buyer customers, since it enables him
to charge them with knowledge of the illegality of the discount, and equal
liability for it, by informing them that it is in excess of any differential which
his difference in cost would justify as compared with his other customers.' 80
Cong.Rec. 9419.

16

Cf. Adelman, Effective Competition and the Antitrust Laws, 61 Harv.L.Rev.

1289, 1331; Edwards, Maintaining Competition, 161.

17

Federal Trade Commission v. Morton Salt Co., 334 U.S. 37, 4445, 68 S.Ct.
822, 827, 92 L.Ed. 1196. Cf. S.Rep.No. 1502, 74th Cong., 2d Sess. 3. Section
2(b) in its entirety reads as follows: '(b) Upon proof being made, at any hearing
on a complaint under this section, that there has been discrimination in price or
services or facilities furnished, the burden of rebutting the prima-facie case thus
made by showing justification shall be upon the person charged with a violation
of this section, and unless justification shall be affirmatively shown, the
Commission is authorized to issue an order terminating the discrimination:
Provided, however, That nothing herein contained shall prevent a seller
rebutting the prima-facie case thus made by showing that his lower price or the
furnishing of services or facilities to any purchaser or purchasers was made in
good faith to meet an equally low price of a competitor, or the services or
facilities furnished by a competitor.' Throughout this opinion, a reference to
2(b) is to the procedural language preceding the proviso; the language of the
proviso, which we construed in Standard Oil Co. v. Federal Trade Comm., 340
U.S. 231, 71 S.Ct. 240, 245, 95 L.Ed. 239, is referred to only when we speak of
the 'proviso of 2(b)'.

18

In this connection, see supra, note 4, and post, note 24.

19

For example, the language of the proviso of 2(b) concerning price

differentials made to meet competition refers only to 'a seller'; further, the
authority given the Commission under 2(b) when justification is not shown is
'to issue an order terminating the discrimination', an order that could not
usefully be directed to buyers. But cf. 80 Cong.Rec. 9418.

20

Congressman Patman, describing the 2(b) rule as to the burden of proof, said:

'It means exactly the rule of law today. It is a restatement of existing law. So
far as I am concerned you can strike it out. It makes no difference. It is the law
of this land exactly as it is written there.' 80 Cong.Rec. 8231.
21

It does not aid understanding to suggest that 2(f) has the same significance, as
to a knowing buyer, as other sections of the Act have as to a knowing seller. A
buyer knowing he is receiving a lower price cannot be said to be in the same
position as a seller granting a lower price. The language of the statute bars such
a construction. Even if the buyer has the 'same' burden as the seller, the fact
that a seller has the burden to show his costs does not automatically, by virtue
of 2(f), become a buyer's burden to show the seller's cost. Nor has Federal
Trade Commission v. A. E. Staley Mfg. Co., 324 U.S. 746, 759760, 65 S.Ct.
971, 977, 89 L.Ed. 1338, and helpful relation to the problem of this case, if for
no other reason than that that case did not call for a detailed consideration of
the procedural portions of 2(b).

22

80 Cong.Rec. 3599. Samuel H. Moss, Inc., v. Federal Trade Commission, 2

Cir., 148 F.2d 378, 379; 80 Cong.Rec. 8241.

23

Our view that 2(b) permits consideration of conventional rules of fairness and
convenience of course requires application of those rules to the particular
evidence in question. Evidence, for example, that the seller's price was made to
meet a competing seller's offer to a buyer charged under 2(f) might be
available to a buyer more readily even than to a seller.

24

We need not in this case consider the weight that can be attached to affirmative
statements by the seller to the buyer that a price was or was not cost-justified,
since there were no such statements in this case. See supra, 346 U.S. 67, 73
S.Ct. 1021. We need not now consider whether in an appropriate case the
Commission may find it necessary to subject such statements to careful
scrutiny. Thus, for instance, the Commission may consider that a seller stating
that a price would be unlawful might in some situations be puffing rather than
stating anything which a buyer can rely on or should be charged with. On the
other hand, the Commission may in some circumstances wish to refuse to
accept a buyer's claim that he relied on an affidavit or other assurance from the
seller that price differentials were cost-justified; the furnishing of such an
assurance might, together with other circumstances, indicate a sufficient
absence of arm's-length bargaining to raise serious doubts as to the weight the
assurance should be given in support of a buyer's claim.

A reading of the record leaves no doubt that petitioner knew in numerous

instances that it was squeezing a price from the seller which was less than the
seller's costs.