363 U.S. 536 (1960), 389, FTC v. Anjeuser-Busch, Inc.

Docket Nº:No. 389
Citation:363 U.S. 536, 80 S.Ct. 1267, 4 L.Ed.2d 1385
Party Name:FTC v. Anjeuser-Busch, Inc.
Case Date:June 20, 1960
Court:United States Supreme Court
 
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Page 536

363 U.S. 536 (1960)

80 S.Ct. 1267, 4 L.Ed.2d 1385

FTC

v.

Anjeuser-Busch, Inc.

No. 389

United States Supreme Court

June 20, 1960

Argued March 2, 1960

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

The Federal Trade Commission found that respondent, a leading national brewer which sells a so-called premium beer at higher prices than the beers of regional and local breweries in the great majority of markets, had reduced its prices only to those customers in the St. Louis area, while maintaining higher prices to all purchasers outside the St. Louis area, and thereby had "discriminated in price" as between purchasers differently located, and that this had diverted substantial business from respondent's St. Louis competitors, had substantially lessened competition and tended to create a monopoly, in violation of § 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, and it ordered respondent to cease and desist. The Court of Appeals concluded that the statutory element of price discrimination had not been established, and it set aside the Commission's order on this ground alone.

Held: the Court of Appeals erred in its construction of § 2(a); the evidence warranted the Commission's finding of price discrimination, and the judgment is reversed and the case is remanded for further proceedings. Pp. 537-554.

(a) Section 2(a) is violated when there is a price discrimination which deals the requisite injury to sellers' or "primary line" competition, even though buyers' or "secondary line" and "tertiary line" competition are unaffected. Pp. 542-545.

(b) The Court of Appeals erred in concluding that, since all competing purchasers paid respondent the same price, so far as the record disclosed, respondent's price cuts were not discriminatory. Pp. 545-546.

(c) A price discrimination within the meaning of the portion of § 2(a) here involved is merely a price difference; and, in order to establish such a price discrimination, it is not necessary to show that the lower price is below cost or unreasonably low for the purpose or design to eliminate competition, and thereby obtain a monopoly. Pp. 546-553.

265 F.2d 677 reversed.

Page 537

WARREN, J., lead opinion

MR. CHIEF JUSTICE WARREN delivered the opinion of the Court.

The question presented is whether certain pricing activities of respondent, Anheuser-Busch, Inc., constituted price discrimination within the meaning of § 2(a) of the Clayton Act, 38 Stat. 730, as amended by the Robinson-Patman Act, 49 Stat. 1526, 15 U.S.C. § 13(a).

Section 2(a) provides in pertinent part:

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 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. . . .

Page 538

This controversy had its genesis in a complaint issued by the Federal Trade Commission in 1955 which charged respondent, a beer producer, with a violation of § 2(a). The complaint alleged that respondent had

discriminated in price between different purchasers of its beer of like grade and quality by selling it to some of its customers at higher prices than to other[s];

that, more specifically, respondent had lowered prices in the St. Louis, Missouri, market, without making similar price reductions in other markets; that this discrimination had already diverted substantial business from respondent's St. Louis competitors; that it was "sufficient" to have the same impact in the future; that there was a "reasonable probability" it would substantially lessen competition in respondent's line of commerce; and that it might also tend to create a monopoly or to injure, destroy, or prevent competition with respondent. Thus, the complaint described a pricing pattern which had adverse effects only upon sellers' [80 S.Ct. 1269] competition, commonly termed primary line competition, and not upon buyers' competition, commonly termed secondary line competition.

Both the hearing examiner and, on appeal, the Commission held that the evidence introduced at the hearing established a violation of § 2(a). The Commission found the facts to be as follows:

Respondent, a leading national brewer,1 sells a so-called premium beer, which is priced higher than the beers of regional and local breweries in the great majority of markets, although both the price of respondent's beer and the premium differential vary from market to market and from time to time. During the period relevant to this case, respondent had three principal competitors in the St. Louis area, all regional breweries: Falstaff Brewing

Page 539

Corporation, Griesedieck Western Brewing Company, and Griesedieck Brothers Brewery Company.2 In accord with the generally prevailing price structure, these breweries normally sold their products at a price substantially lower than respondent's.

In 1953, most of the national breweries, including respondent, granted their employees a wage increase, and, on October 1,1953, they put into effect a general price increase.3 Although many regional and local breweries throughout the country followed suit by raising their prices, Falstaff, Griesedieck Western, and Griesedieck Brothers maintained their pre-October price of $2.35 per standard case. Although respondent's sales in the St. Louis area did not decline, its national sales fell, along with industry sales in general.

On January 4, 1954, respondent lowered its price in the St. Louis market from $2.93 to $2.68 per case, thereby reducing the previous 58$ differential to 33$. A second price cut occurred on June 21, 1954, this time to $2.35, the same price charged by respondent's three competitors. On January 3, 1954, the day before the first price cut, respondent's price in the St. Louis market had been lower

Page 540

than its price in other markets,4 and, during the period of the price reductions in the St. Louis area, respondent [80 S.Ct. 1270] made no similar price reductions in any other market. In March, 1955, respondent increased its St. Louis price 45¢ per case, and Falstaff, Griesedieck Western, and Griesedieck Brothers almost immediately raised their prices 15¢, which reestablished a substantial differential. This ended the period of alleged price discrimination.

The Commission concluded:

As a result of maintaining higher prices to all purchasers outside of the St. Louis area and charging the lower prices, as reduced in 1954, to only those customers in the St. Louis area, respondent discriminated in price as between purchasers differently located.

Since, as will appear, it is this aspect of the decision which concerns us, it is necessary only to sketch summarily the remaining elements in the Commission's decision. The Commission's finding of competitive injury was predicated to a substantial degree upon what it regarded as a demonstrated diversion of business to respondent from its St. Louis competitors during the period of price discrimination. For example, by comparing that period with a similar period during the previous year, the Commission determined that respondent's sales had risen 201.5%, Falstaff's sales and dropped

Page 541

slightly, Griesedieck Western's sales had fallen about 33%, and Griesedieck Brothers' sales had plummeted about 41%. In tabular form, the relative market positions of the St. Louis sellers were as follows:

Dec. 31 June 30 Mar. 1 July 31

1953 1954 1955 1955

Respondent . . . 12.5 16.55 39.3 21.03

Griesedieck

Brothers . . . 14.4 12.58 4.8 7.36

Falstaff . . . . 29.4 32.05 29.1 36.62

Griesedieck

Western . . . . 38.9 33. 23.1 27.78

All others . . . 4.8 5.82 3.94 7.21

The Commission rejected respondent's contention that its price reductions had been made in good faith to meet the equally low price of a competitor within the meaning of the proviso to § 2(b) of the Act, 49 Stat. 1526, 15 U.S.C. § 13(b), and also found respondent's attack upon the examiner's cease and desist order to be meritless. The Commission thereupon adopted and issued that order, with only slight modification.5

On review, the Court of Appeals set aside the order. 265 F.2d 677. We granted certiorari 361 U.S. 880, because a conflict had developed among the Courts of Appeals on a question of importance in the administration of the statute. See Atlas Building Products Co. v. Diamond Block & Gravel Co., 269 F.2d 950 (C.A. 10th Cir.).

Page 542

The limited nature of our inquiry can be fully appreciated only in the light of the correspondingly narrow decision of the Court of Appeals, which rested entirely upon the holding that the threshold statutory element of price discrimination had not been established. Thus, the Court of Appeals did not consider whether the record supported a finding of the requisite competitive injury, whether respondent's good faith defense was valid, or whether the Commission's order was unduly broad. We have concluded that the Court of Appeals erred in its construction of § 2(a), and that the evidence fully warranted the Commission's...

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