STANDARD OIL CO. v. FEDERAL TRADE COMMISSION
No. 1
Supreme Court of the United States
Decided January 8, 1951
Argued January 9-10, 1950. — Reargued October 9, 1950
340 U.S. 231
By special leave of Court, William Simon argued the cause and filed a brief for the Empire State Petroleum Association, Inc. et al., as amici curiae, urging reversal.
James W. Cassedy argued the cause for respondent. With him on the brief was W. T. Kelley.
By special leave of Court, Cyrus Austin argued the cause and filed a brief for the Retail Gasoline Dealers Association of Michigan, Inc. et al., as amici curiae, urging affirmance.
Raoul Berger filed a brief for the Citrin-Kolb Oil Company, as amicus curiae, urging reversal.
MR. JUSTICE BURTON delivered the opinion of the Court.
In this case the Federal Trade Commission challenged the right of the Standard Oil Company, under the Rob-
For the reasons hereinafter stated, we agree with the court below that the sales were made in interstate commerce but we agree with petitioner that, under the Act, the lower price to the jobbers was justified if it was made to retain each of them as a customer and in good faith to meet an equally low price of a competitor.
I. FACTS.
Reserving for separate consideration the facts determining the issue of interstate commerce, the other material
Since the effective date of the Robinson-Patman Act, June 19, 1936, petitioner has sold its Red Crown gasoline to its “jobber” customers at its tank-car prices. Those prices have been 1 1/2¢ per gallon less than its tank-wagon prices to service station customers for identical gasoline in the same area. In practice, the service stations have resold the gasoline at the prevailing retail service station prices.3 Each of petitioner‘s so-called “jobber” customers has been free to resell its gasoline at retail or wholesale. Each, at some time, has resold some of it at retail. One now resells it only at retail. The others now resell it largely at wholesale. As to resale prices, two of the “jobbers” have resold their gasoline only at the prevailing wholesale or retail rates. The other two, however, have reflected, in varying degrees, petitioner‘s reductions in the cost of the gasoline to them by reducing their resale prices of that gasoline below the prevailing rates. The effect of these reductions has thus reached competing retail service stations in part through retail stations operated by the “jobbers” and in part through retail stations which purchased gasoline from the “jobbers” at less than the prevailing tank-wagon prices. The Commission found that such reduced resale prices “have resulted in injuring, destroying, and preventing competition between said favored dealers and retail dealers in respondent‘s [petitioner‘s] gasoline and other major brands of gasoline . . . .” 41 F. T. C. 263, 283. The distinctive
Petitioner placed its reliance upon evidence offered to show that its lower price to each jobber was made in order to retain that jobber as a customer and in good faith to meet an equally low price offered by one or more competitors. The Commission, however, treated such evidence as not relevant.
II. THE SALES WERE MADE IN INTERSTATE COMMERCE.
In order for the sales here involved to come under the Clayton Act, as amended by the Robinson-Patman Act,
Facts determining this were found by the Commission as follows: Petitioner is an Indiana corporation, whose principal office is in Chicago. Its gasoline is obtained from fields in Kansas, Oklahoma, Texas and Wyoming. Its refining plant is at Whiting, Indiana. It distributes its products in 14 middle western states, including Michigan. The gasoline sold by it in the Detroit, Michigan, area, and involved in this case, is carried for petitioner by tankers on the Great Lakes from Indiana to petitioner‘s marine terminal at River Rouge, Michigan. Enough gasoline is accumulated there during each navigation season so that a winter‘s supply is available from the terminal. The gasoline remains for varying periods at the terminal or in nearby bulk storage stations, and while there it is under the ownership of petitioner and en route from petitioner‘s refinery in Indiana to its market in Michigan. “Although the gasoline was not brought to River Rouge pursuant to orders already taken, the demands of the Michigan territory were fairly constant, and the petitioner‘s customers’ demands could be accurately estimated, so the flow of the stream of commerce kept surging from Whiting to Detroit.” 173 F. 2d at 213-214. Gasoline delivered to customers in Detroit, upon individual orders for it, is taken from the gasoline at the terminal in interstate commerce en route for delivery in that area. Such sales are well within the jurisdictional requirements of the Act. Any other conclusion would fall short of the recog-
III. THERE SHOULD BE A FINDING AS TO WHETHER OR NOT PETITIONER‘S PRICE REDUCTION WAS MADE IN GOOD FAITH TO MEET A LAWFUL EQUALLY LOW PRICE OF A COMPETITOR.
Petitioner presented evidence tending to prove that its tank-car price was made to each “jobber” in order to retain that “jobber” as a customer and in good faith to meet a lawful and equally low price of a competitor. Petitioner sought to show that it succeeded in retaining these customers, although the tank-car price which it offered them merely approached or matched, and did not undercut, the lower prices offered them by several competitors of petitioner. The trial examiner made findings on the point7 but the Commission declined to do so, saying:
“Based on the record in this case the Commission concludes as a matter of law that it is not material
whether the discriminations in price granted by the respondent to the said four dealers were made to meet equally low prices of competitors. The Commission further concludes as a matter of law that it is unnecessary for the Commission to determine whether the alleged competitive prices were in fact available or involved gasoline of like grade or quality or of equal public acceptance. Accordingly the Commission does not attempt to find the facts regarding those matters because, even though the lower prices in question may have been made by respondent in good faith to meet the lower prices of competitors, this does not constitute a defense in the face of affirmative proof that the effect of the discrimination was to injure, destroy and prevent competition with the retail stations operated by the said named dealers and with stations operated by their retailer-customers.” 41 F. T. C. 263, 281-282.
The court below affirmed the Commission‘s position.8 There is no doubt that under the Clayton Act, before its amendment by the Robinson-Patman Act, this evidence would have been material and, if accepted, would have
“SEC. 2. That it shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly to discriminate in price between different purchasers of commodities . . . where the effect of such discrimination may be to substantially lessen competition or tend to create a monopoly in any line of commerce: Provided, That nothing herein contained shall prevent discrimination in price between purchasers of commodities on account of differences in the grade, quality, or quantity of the commodity sold, or that makes only due allowance for difference in the cost of selling or transportation, or discrimination in price in the same or different communities made in good faith to meet competition: And provided further, That nothing herein contained shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in restraint of trade.” (Emphasis added within the first proviso.) 38 Stat. 730-731,
15 U. S. C. (1934 ed.) § 13 .
The question before us, therefore, is whether the amendments made by the Robinson-Patman Act deprived those facts of their previously recognized effectiveness as a defense. The material provisions of § 2, as amended, are
The defense in subsection (b), now before us, is limited to a price reduction made to meet in good faith an equally low price of a competitor. It thus eliminates certain difficulties which arose under the original Clayton Act. For example, it omits reference to discriminations in price “in
Subsections 2 (a) and (b), as amended, are as follows:
“SEC. 2. (a) That it shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality . . . 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: . . . And provided further, That nothing herein contained shall prevent price changes from time to time . . . in response to changing conditions affecting the market for or the marketability of the goods concerned . . . .
“(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.” (Emphasis added in part.) 49 Stat. 1526,
15 U. S. C. § 13 (a) and(b) .
This right of a seller, under § 2 (b), to meet in good faith an equally low price of a competitor has been considered here before. Both in Corn Products Refining Co. v. Federal Trade Comm‘n, 324 U. S. 726, and in Federal Trade Comm‘n v. Staley Mfg. Co., 324 U. S. 746, evidence in support of this defense was reviewed at length. There would have been no occasion thus to review it under the theory now contended for by the Commission. While this Court did not sustain the seller‘s defense in either case, it did unquestionably recognize the relevance of the evidence in support of that defense. The decision in each case was based upon the insufficiency of the seller‘s evidence to establish its defense, not upon the inadequacy of its defense as a matter of law.9
In the Corn Products case, supra, after recognizing that the seller had allowed differentials in price in favor of certain customers, this Court examined the evidence presented by the seller to show that such differentials were
“Examination of the testimony satisfies us, as it did the court below, that it was insufficient to sustain a finding that the lower prices allowed to favored customers were in fact made to meet competition. Hence petitioners failed to sustain the burden of showing that the price discriminations were granted for the purpose of meeting competition.” (Emphasis added.) 324 U. S. at 741.10
In the Staley case, supra, most of the Court‘s opinion is devoted to the consideration of the evidence introduced in support of the seller‘s defense under § 2 (b). The discussion proceeds upon the assumption, applicable here, that if a competitor‘s “lower price” is a lawful individual price offered to any of the seller‘s customers, then the seller is protected, under § 2 (b), in making a counteroffer provided the seller proves that its counteroffer is made to meet in good faith its competitor‘s equally low price. On the record in the Staley case, a majority of the Court of Appeals, in fact, declined to accept the findings of the Commission and decided in favor of the accused seller.11 This Court, on review, reversed that judgment
“Congress has left to the Commission the determination of fact in each case whether the person, charged with making discriminatory prices, acted in good faith to meet a competitor‘s equally low prices. The determination of this fact from the evidence is for the Commission. See Federal Trade Commission v. Pacific States Paper Trade Assn., 273 U. S. 52, 63; Federal Trade Commission v. Algoma Lumber Co., 291 U. S. 67, 73. In the present case, the Commission‘s finding that respondents’ price discriminations were not made to meet a ‘lower’ price and consequently were not in good faith, is amply supported by the record, and we think the Court of Appeals erred in setting aside this portion of the Commission‘s order to cease and desist.
. . . . .
“In appraising the evidence, the Commission recognized that the statute does not place an impossible burden upon sellers, but it emphasized the good faith requirement of the statute, which places the burden
“. . . We agree with the Commission that the statute at least requires the seller, who has knowingly discriminated in price, to show the existence of facts which would lead a reasonable and prudent person to believe that the granting of a lower price would in fact meet the equally low price of a competitor. Nor was the Commission wrong in holding that respondents failed to meet this burden.” 324 U. S. at 758, 759-760.
See also, Federal Trade Comm‘n v. Cement Institute, 333 U. S. 683, 721-726; Federal Trade Comm‘n v. Morton Salt Co., 334 U. S. 37, 43; and United States v. United States Gypsum Co., 340 U. S. 76, 92. All that petitioner asks in the instant case is that its evidence be considered and that findings be made by the Commission as to the sufficiency of that evidence to support petitioner‘s defense under § 2 (b).
In addition, there has been widespread understanding that, under the Robinson-Patman Act, it is a complete defense to a charge of price discrimination for the seller to show that its price differential has been made in good faith to meet a lawful and equally low price of a competitor. This understanding is reflected in actions and statements of members and counsel of the Federal Trade Commission.12 Representatives of the Department of
“Congress was dealing with competition, which it sought to protect, and monopoly, which it sought to prevent.” Staley Mfg. Co. v. Federal Trade Comm‘n, 135 F. 2d 453, 455. We need not now reconcile, in its entirety, the economic theory which underlies the Robinson-Patman Act with that of the Sherman and Clayton Acts.15
It is enough to say that Congress did not seek by the Robinson-Patman Act either to abolish competition or so radically to curtail it that a seller would have no substantial right of self-defense against a price raid by a competitor. For example, if a large customer requests his seller to meet a temptingly lower price offered to him by one of his seller‘s competitors, the seller may well find it essential, as a matter of business survival, to meet that price rather than to lose the customer. It might be that this customer is the seller‘s only available market for the major portion of the seller‘s product, and that the loss of this customer would result in forcing a much higher unit cost and higher sales price upon the seller‘s other custom-
In a case where a seller sustains the burden of proof placed upon it to establish its defense under § 2 (b), we find no reason to destroy that defense indirectly, merely because it also appears that the beneficiaries of the seller‘s price reductions may derive a competitive advantage from them or may, in a natural course of events, reduce their own resale prices to their customers. It must have been obvious to Congress that any price reduction to any dealer may always affect competition at that dealer‘s level as well as at the dealer‘s resale level, whether or not the reduction to the dealer is discriminatory. Likewise, it must have been obvious to Congress that any price reductions initiated by a seller‘s competitor would, if not met by the seller, affect competition at the beneficiary‘s level or among the beneficiary‘s customers just as much as if those reductions had been met by the seller. The proviso in § 2 (b), as interpreted by the Commission, would not be available when there was or might be an injury to competition at a resale level. So interpreted, the proviso would have such little, if any, applicability as to be practically meaningless. We may, therefore, conclude that Congress meant to permit the natural consequences to follow the seller‘s action in meeting in good faith a lawful and equally low price of its competitor.
In its argument here, the Commission suggests that there may be some situations in which it might recognize
The judgment of the Court of Appeals, accordingly, is reversed and the case is remanded to that court with instructions to remand it to the Federal Trade Commission to make findings in conformity with this opinion.
It is so ordered.
MR. JUSTICE MINTON took no part in the consideration or decision of this case.
MR. JUSTICE REED, dissenting.*
The Federal Trade Commission investigated practices of the Standard Oil Company of Indiana in selling its gasoline in the Detroit area at different prices to competing local distributors, in alleged violation of the Robinson-Patman (anti-price discrimination) Act. Standard‘s defense is not a denial of that discriminatory practice but a complete justification, said to be allowed by the
The need to allow sellers to meet competition in price from other sellers while protecting the competitors of the buyers against the buyers’ advantages gained from the price discrimination was a major cause of the enactment of the 1936 Robinson-Patman Act. The
“On the other hand, the proviso is readily understandable as simply continuing in effect a defense which is equally absolute, but more limited in scope than that which existed under § 2 of the original Clayton Act.”
Such a conclusion seems erroneous. What follows in this dissent demonstrates, we think, that Congress intended so to amend the Clayton Act that the avenue of escape given price discriminators by its “meeting competition” clause should be narrowed. The Court‘s interpretation leaves what the seller can do almost as wide open as before. See p. 263 et seq., infra. It seems clear to us that the interpretation put upon the clause of the Robinson-Patman Act by the Court means that no real change has been brought about by the amendment.
The public policy of the United States fosters the free-enterprise system of unfettered competition among producers and distributors of goods as the accepted method to put those goods into the hands of all consumers at the least expense.3 There are, however, statutory exceptions to such unlimited competition.4 Nondiscriminatory
The first enactment to put limits on discriminatory selling prices was the
“It thus eliminates certain difficulties which arose under the original Clayton Act. For example, it omits reference to discriminations in price ‘in the same or different communities . . .’ and it thus restricts the proviso to price differentials occurring in actual competition. It also excludes reductions which undercut the ‘lower price’ of a competitor. None of these changes, however, cut into the actual core of the defense. That still consists of the provision that wherever a lawful lower price of a competitor threatens to deprive a seller of a customer, the seller, to retain that customer, may in good faith meet that lower price.”
We see little difference. The seller may still, under the Court‘s interpretation, discriminate in sales of goods of
I.
Legislative History. Upon the interpretation of the words and purpose of this last addition by the Robinson-Patman Act to curbs on discrimination in trade, the narrow statutory issues in this case turn. Though narrow, they are important if trade is to have the benefit of careful investigation before regulation, attainable under the Federal Trade Commission Act but so difficult when attempted by prosecutions in courts with the limitations of judicial procedure. As an aid to the interpretation of
The Clayton Act created a broad exception from control for prices made in good faith to meet competition. This raised problems of which Congress was aware. In reporting on a redrafted version of S. 3154, the Senate‘s companion bill to the House bill that became the Robinson-Patman Act, the Senate Committee on the Judiciary, February 3, 1936, pointed out the weakness of § 2 of the Clayton Act in permitting discrimination to meet competition, and suggested a harsh remedy, the elimination of its italicized proviso in note 6, supra, without the mollifying words of
Events in the course of the proposed legislation in the Senate and House have pertinence. The Senate inserted the original ineffective language of the Clayton Act in its exact form in the Senate bill. In the same draft it adopted an amendment similar to the proviso ultimately enacted. 80 Cong. Rec. 6426, 6435. In the House, Representative Patman explained his view of the dangers in the original proviso.12 It was taken out in Confer-
II.
Statutory Interpretation. This résumé of the origin and purpose of the original § 2 of the Clayton Act and
This is our reason. The statutory development and the information before Congress concerning the need for strengthening the competitive price provision of the Clayton Act, make clear that the evil dealt with by the proviso of
The structure and wording of the Robinson-Patman Amendment to the Clayton Act also conduce to our conclusion. In the original Clayton Act, § 2 was not divided into subsections. In that statute, § 2 stated the body of the substantive offense, and then listed, in a series of provisos, various circumstances under which discrimi-
The Court suggests that former Federal Trade Commission cases decided here have treated the “meeting competition” clause of the Robinson-Patman Act as being an absolute defense, not merely a rebuttal of the discrimination charge requiring further finding by the Commission. Reference is made to Corn Products Refining Co. v. Federal Trade Comm‘n, 324 U. S. 726, and Federal Trade Comm‘n v. Staley Mfg. Co., 324 U. S. 746. In the Corn Products case, dealing with a basing point scheme for delivered prices, this Court merely said at p. 741:
“The only evidence said to rebut the prima facie case made by proof of the price discriminations was given by witnesses who had no personal knowledge of the transactions, and was limited to statements of each witness‘s assumption or conclusion that the price discriminations were justified by competition.”
And then went on to use the language quoted at p. 244 of the Court‘s opinion. There was no occasion to consider the effect of a successful rebuttal. As authority for its statement, we there cited the Staley case. That citation included these words at pp. 752-753:
“Prior to the Robinson-Patman amendments, § 2 of the Clayton Act provided that nothing contained in
it ‘shall prevent’ discriminations in price ‘made in good faith to meet competition.’ The change in language of this exception was for the purpose of making the defense a matter of evidence in each case, raising a question of fact as to whether the competition justified the discrimination. See the Conference Report, H. Rep. No. 2951, 74th Cong., 2d Sess., pp. 6-7; see also the statement of Representative Utterbach [sic], the Chairman of the House Conference Committee, 80 Cong. Rec. 9418.”
After that statement, which it should be noted relies upon Mr. Utterback‘s interpretation quoted at note 14 of this opinion, the Court in the Staley case goes on to say that there was no evidence to show that Staley adopted a lower price to meet an equally low price of a competitor. Again there was no occasion for this Court to meet the present issue. We think our citation in Staley, quoted above, shows the then position of this Court.16
There are arguments available to support the contrary position. No definite statement appears in the committee reports that “meeting competition” is henceforth to be only a rebuttal of a prima facie case and not a full justification for discrimination in price. The proviso of
III.
Conclusion. In view of the Court‘s ruling, we will not enlarge this dissent by discussing other problems raised by the case. We have said enough to show that we would affirm the decree below in principle, even though we should conclude some amendment might be required in the wording of the order.
THE CHIEF JUSTICE and MR. JUSTICE BLACK join in this dissent.
Notes
Robinson-Patman Act:“SEC. 2. That it shall be unlawful for any person engaged in commerce . . . to discriminate in price between different purchasers of commodities, . . . where the effect of such discrimination may be to substantially lessen competition or tend to create a monopoly in any line of commerce: Provided, That nothing herein contained shall prevent . . . discrimination in price in the same or different communities made in good faith to meet competition: . . . .”
“SEC. 2. (a) That it shall be unlawful for any person engaged in commerce, . . . to discriminate in price between different purchasers of commodities . . . 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: . . . .
“(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.”
“The recognition by respondent [petitioner] of Ned‘s Auto Supply Company as a jobber or wholesaler [which carried with it the tank-car price for gasoline], was a forced recognition given to retain that company‘s business. Ned‘s Company at the time of recognition,
S. Rep. No. 1502, 74th Cong., 2d Sess. 4:“The weakness of present section 2 lies principally in the fact that: (1) It places no limit upon differentials permissible on account of differences in quantity; and (2) it permits discriminations to meet competition, and thus tends to substitute the remedies of retaliation for those of law, with destructive consequences to the central object of the bill. Liberty to meet competition which can be met only by price cuts at the expense of customers elsewhere, is in its un-
masked effect the liberty to destroy competition by selling locally below cost, a weapon progressively the more destructive in the hands of the more powerful, and most deadly to the competitor of limited resources, whatever his merit and efficiency. While the bill as now reported closes these dangerous loopholes, it leaves the fields of competition free and open to the most efficient, and thus in fact protects them the more securely against inundations of mere power and size.
“Specific phrases of section 2 (a), as now reported, may be noted as follows:
“One:
“’ * * * where either or any of the purchases involved in such discrimination are in commerce * * *’
“Section 2 (a) attaches to competitive relations between a given seller and his several customers, and this clause is designed to extend its scope to discriminations between interstate and intrastate customers, as well as between those purely interstate. Discriminations in excess of sound economic differences involve generally an element of loss, whether only of the necessary minimum of profits or of actual costs, that must be recouped from the business of customers not granted them. When granted by a given seller to his customers in other States, and denied to those within the State, they involve the use of that interstate commerce to the burden and injury of the latter. When granted to those within the State and denied to those beyond, they involve conversely a directly resulting burden upon interstate commerce with the latter. Both are within the proper and well-recognized power of Congress to suppress.”
“The purpose of this proposed legislation is to restore, so far as possible, equality of opportunity in business by strengthening anti-trust laws and by protecting trade and commerce against unfair trade practices and unlawful price discrimination, and also against restraint and monopoly for the better protection of consumers,
workers, and independent producers, manufacturers, merchants, and other businessmen.
“To accomplish its purpose, the bill amends and strengthens the Clayton Act by prohibiting discriminations in price between purchasers where such discriminations cannot be shown to be justified by differences in the cost of manufacture, sale, or delivery resulting from different methods or quantities in which such commodities are to such purchasers sold and delivered. It also prohibits brokerage allowances except for services actually rendered, and advertising and other service allowances unless such allowances or services are made available to all purchasers on proportionally equal terms. It strikes at the basing-point method of sale, which lessens competition and tends to create a monopoly.”
“This proviso represents a contraction of an exemption now contained in section 2 of the Clayton Act which permits discriminations without limit where made in good faith to meet competition. It should be noted that while the seller is permitted to meet local competition, it does not permit him to cut local prices until his competitor has first offered lower prices, and then he can go no further than to meet those prices. If he goes further, he must do so likewise with all his other customers, or make himself liable to all of the penalties of the act, including treble damages. In other words, the proviso permits the seller to meet the price actually previously offered by a local competitor. It permits him to go no further.”
“The Commission therefore recommends that section 2 of the Clayton Act be amended to read as follows:
“‘It shall be unlawful for any person engaged in commerce, in
any transaction in or affecting such commerce, either directly or indirectly to discriminate unfairly or unjustly in price between different purchasers of commodities, which 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.‘”
This report was utilized by the House Committee dealing with the proposed Robinson-Patman legislation. H. R. Rep. No. 2287, 74th Cong., 2d Sess. 3, 7.
See also, the statement filed by Walter B. Wooden, Assistant Chief
80 Cong. Rec. 8235:“Mr. Chairman, I would like to ask a question of the gentleman from Texas [Mr. PATMAN]. A great many of the industries in Ohio
were very much in favor of the proviso in the Senate bill, appearing on page 4, and reading as follows:
“‘And provided further, That nothing herein contained shall prevent discrimination in price in the same or different commodities made in good faith to meet competition.’
“I find that on page 9 of the Patman bill, beginning in line 14, there appear these words:
“‘Provided, however, That nothing herein contained shall prevent a seller rebutting the prima facie case thus made by showing that his lower price to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor.’
“Will the gentleman explain the difference between these two proposals?
“Mr. PATMAN. If the Senate amendment should be adopted it would really destroy the bill. It would permit the corporate chains to go into a local market, cut the price down so low that it would destroy local competitors and make up for their losses in other places where they had already destroyed their competitors. One of the objects of the bill is to get around that phrase and prevent the large corporate chains from selling below cost in certain localities, thus destroying the independent merchants, and making it up at other places where their competitors have already been destroyed. I hope the gentleman will not insist on the Senate amendment, because it would be very destructive of the bill. The phrase ‘equally low price’ means the corporate chain will have the right to compete with the local merchants. They may meet competition, which is all right, but they cannot cut down the price below cost for the purpose of destroying the local man.
“Mr. COOPER of Ohio. What does the gentleman‘s proviso mean?
“Mr. PATMAN. It means they may meet competition, but not cut down the price below cost. It means an equally low price but not below that. It permits competition, but it does not permit them to cut the price below cost in order to destroy their competitors. I hope the gentleman will not insist on the Senate amendment.”
But see pp. 265 and 266, infra.
“The Senate bill contained a further proviso—
“‘That nothing herein contained shall prevent discrimination in price
in the same or different communities made in good faith to meet competition.’
“This language is found in existing law, and in the opinion of the conferees is one of the obstacles to enforcement of the present Clayton Act. The Senate receded, and the language is stricken. A provision relating to the question of meeting competition, intended to operate only as a rule of evidence in a proceeding before the Federal Trade Commission, is included in subsection (b) in the conference text as follows:
“‘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.‘”
“In connection with the above rule as to burden of proof, it is also provided that a seller may show that his lower price was made in good faith to meet an equally low price of a competitor, or that his furnishing of services or facilities was made in good faith to meet those furnished by a competitor. It is to be noted, however, that this does not set up the meeting of competition as an absolute bar to a charge of discrimination under the bill. It merely permits it to be shown in evidence. This provision is entirely procedural. It does not determine substantive rights, liabilities, and duties. They are fixed in the other provisions of the bill. It leaves it a question of fact to be determined in each case, whether the competition to be
met was such as to justify the discrimination given, as one lying within the limitations laid down by the bill, and whether the way in which the competition was met lies within the latitude allowed by those limitations.
“This procedural provision cannot be construed as a carte blanche exemption to violate the bill so long as a competitor can be shown to have violated it first, nor so long as that competition cannot be met without the use of oppressive discriminations in violation of the obvious intent of the bill.
“If this proviso were construed to permit the showing of a competing offer as an absolute bar to liability for discrimination, then it would nullify the act entirely at the very inception of its enforcement, for in nearly every case mass buyers receive similar discriminations from competing sellers of the same product. One violation of law cannot be permitted to justify another. As in any case of self-defense, while the attack against which the defense is claimed may be shown in evidence, its competency as a bar depends also upon whether it was a legal or illegal attack. A discrimination in violation of this bill is in practical effect a commercial bribe to lure the business of the favored customer away from the competitor, and if one bribe were permitted to justify another the bill would be futile to achieve its plainly intended purposes.”