Federal Trade Commission v. Morton Salt Co

• Decision Date: 03 May 1948
• Docket Number: No. 464,464
• Parties: FEDERAL TRADE COMMISSION v. MORTON SALT CO
• Court: U.S. Supreme Court

334 U.S. 37

68 S.Ct. 822

92 L.Ed. 1196

FEDERAL TRADE COMMISSION

v MORTON SALT CO.

No. 464.

Argued March 10, 1948.

Decided May 3, 1948.

[Syllabus from pages 37-39 intentionally omitted] Mr. Robert L. Stern, of Washington, D.C., for petitioner.

Mr. Lloyd M. McBride, of Chicago, Ill., for respondent.

Mr. Justice BLACK delivered the opinion of the Court.

The Federal Trade Commission, after a hearing, found that the respondent, which manufacturers and sells table salt in interstate commerce, had discriminated in price between different purchasers of like grades and qualities, and concluded that such discriminations were in violation of § 2 of the Clayton Act, 38 Stat. 730, as amended by the Robinson-Patman Act, 49 Stat. 1526, 15 U.S.C. § 13, 15 U.S.C.A. § 13.¹ It accordingly issued a cease and desist order. 39 F.T.C. 35.² Upon petition of the respondent the Circuit Court of Appeals, with one judge dissenting, set aside the Commission's findings and order, directed the Commission to dismiss its complaint against respondent, and denied a cross petition of the Commission for enforcement of its order. 7 Cir., 162 F.2d 949. The Court's judgment rested on its construction of the Act, its holding that crucial findings of the Commission were either not supported by evidence or were contrary to the evidence, and its conclusion that the Commission's order was too broad. Since questions of importance in the construction and administration of the Act were presented, we granted certiorari. 332 U.S. 850, 68 S.Ct. 355. Disposition of these questions requires only a brief narration of the facts.

Respondent manufacturers several different brands of table salt³ and sells them directly to (1) wholesalers or jobbers, who in turn resell to the retail trade, and (2) large retailers, including chain store retailers. Respondent sells its finest brand of table salt, known as Blue Label, on what it terms a standard quantity discount system available to all customers. Under this system the purchasers pay a delivered price and the cost to both wholesale and retail purchasers of this brand differs according to the quantities bought. These prices are as follows, after making allowance for rebates and discounts:

Only five coma nies have ever bought sufficient quantities of respondent's salt to obtain the $1.35 per case price. These companies could buy in such quantities because they operate large chains of retail stores in various parts of the country.⁴ As a result of this low price these five companies have been able to sell Blue Label salt at retail cheaper than wholesale purchasers from respondent could reasonably sell the same brand of salt to independently operated retail stores, many of whom competed with the local outlets of the five chain stores.

Respondent's table salts, other than Blue Label, are also sold under a quantity discount system differing slightly from that used in selling Blue Label. Sales of these other brands in less-than-carload lots are made at list price plus freight from plant to destination. Carload purchasers are granted approximately a 5 per cent discount; approximately a 10 per cent discount is granted to purchasers who buy as much as $50,000 worth of all brands of salt in any consecutive twelve-month period. Respondent's quantity discounts on Blue Label and on other table salts were enjoyed by certain wholesalers and retailers who competed with other wholesalers and retailers to whom these discounts were refused.

In addition to these standard quantity discounts, special allowances were granted certain favored customers who competed with other customers to whom they were denied.⁵

First. Respondent's basic contention, which it argues this case hinges upon, is that its 'standard quantity discounts, available to all on equal terms, as contrasted for example, to hidden or special rebates, allowances, prices or discounts, are not discriminatory, within the meaning of the Robinson-Patman Act.' Theoretically, these discounts are equally available to all, but functionally they are not. For as the record indicates (if reference to it on this point were necessary) no single independent retail grocery store, and probably no single wholesaler, bought as many as 50,000 cases or as much as $50,000 worth of table salt in one year. Furthermore, the record shows that, while certain purchasers were enjoying one or more of respondent's standard quantity discounts, some of their competitors made purchases in such small quantities that they could not qualify for any of respondent's discounts, even those based on carload shipments. The legislative history of the Robinson-Patman Act makes it abundantly clear 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 large buyer's quantity purchasing ability. The Robinson-Patman 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 manufacture, delivery or sale, or by reason of h e seller's good faith effort to meet a competitor's equally low price.

Section 2 of the original Clayton Act had included a proviso that nothing contained in it should prevent 'discrimination in price * * * 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 * * *.' That section has been construed as permitting quantity discounts, such as those here, without regard to the amount of the seller's actual savings in cost attributable to quantity sales or quantity deliveries. Goodyear Tire & Rubber Co. v. Federal Trade Comm., 6 Cir., 101 F.2d 620. The House Committee Report on the Robinson-Patman Act considered that the Clayton Act's proviso allowing quantity discounts so weakened § 2 'as to render it inadequate, if not almost a nullity.'⁶ The Committee considered the present Robinson-Patman amendment to § 2 'of great importance.' Its purpose was to limit 'the use of quantity price differentials to the sphere of actual cost differences. Otherwise,' the report continued, 'such differentials would become instruments of favor and privilege and weapons of com- petitive oppression.'⁷ The Senate Committee reporting the bill emphasized the same purpose,⁸ as did the Congressman in charge of the Conference Report when explaining it to the House just before final passage.⁹ And it was in furtherance of this avowed purpose-to protect competition from all price differentials except those based in full on cost savings-that § 2(a) of the amendment 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 foregoing references, without regard to others which could be mentioned, establish that respondent's standard quantity discounts are discriminatory within the meaning of the Act, and are prohibited by it whenever they have the defined effect on competition. See Federal Trade Comm. v. Staley Co., 324 U.S. 746, 751, 65 S.Ct. 971, 973, 89 L.Ed. 1338.

Second. The Government interprets the opinion of the Circuit Court of Appeals as having held that in order to establish 'discrimination in price' under the Act the burden rested on the Commission to prove that respondent's quantity discount differentials were not justified by its cost savings.¹⁰ Respondent does not so understand the Court of Appeals decision, and furthermore admits that no such burden rests on the Commission. We agree that it does not. First, the general rule of statutory construction that the burden of proving justification or exemption under a special exception to the prohibitions of a statute generally rests on one who claims its benefits,¹¹ requires that respondent undertake this proof under the proviso of § 2(a). Secondly, § 2(b) of the Act specifically imposes the burden of showing justification upon one who is shown to have discriminated in prices. And the Senate committee report on the bill explained that the provisos of § 2(a) throw 'upon any who claims the benefit of those exceptions the burden of showing that their case falls within them.'¹² We think that the language of the Act, and the legislative history just cited, show that Congress meant by using the words 'discrimination in price' in § 2 that in a case involving competitive injury between a seller's customers the Commission need only prove that a seller had charged one purchaser a higher price for like goods than he had charged one or more of the purchaser's competitors.¹³ This construction is consistent with the first sentence of § 2(a) in which it is made unlawful 'to discriminate in price between different purchasers of commodt ies of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce * * * and where the effect of such discrimination may be * * * 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 * * *.'

Third. It is argued that the findings fail to show that respondent's discriminatory discounts had in fact caused injury to competition. There are specific findings that such injuries had resulted from respondent's discounts although the statute does not require the Commission to find that injury has actually resulted. The statute requires no more than that the effect of the prohibited price discriminations 'may be substantially to lessen competition * * * or to injure, destroy, or prevent competition.' After a careful consideration of this provision of the Robinson-Patman Act, we have said that 'the statute does not require that the discriminations must in fact have...