Federal Trade Commission v. Fred Meyer, Inc

Citation390 U.S. 341,88 S.Ct. 904,19 L.Ed.2d 1222
Decision Date18 March 1968
Docket NumberNo. 27,27
CourtUnited States Supreme Court

Daniel M. Friedman, Washington, D.C., for petitioner.

Edward F. Howrey, Washington, D.C., for respondents.

Mr. Chief Justice WARREN delivered the opinion of the Court.

The Federal Trade Commission, after extensive proceedings, ruled that respondents, the corporate owner of a chain of supermarkets and two of its officers, had unlawfully induced certain suppliers to engage in discriminatory pricing and sales promotional activities prohibited by §§ 2(a) and 2(d) of the Clayton Act, as amended by the Robinson-Patman Act.1 63 F.T.C. —- (1963). The Court of Appeals for the Ninth Circuit disagreed with the Commission's Construction of § 2(d) and reversed in part its ruling that the section had been violated. 359 F.2d 351 (1966). We granted certiorari, 386 U.S. 907, 87 S.Ct. 853, 17 L.Ed.2d 781 (1967), because the case presents important questions concerning the scope of a key provision of the Robinson-Patman Act.


Section 2(d) makes it unlawful for a supplier in interstate commerce to grant advertising or other sales promotional allowances to one 'customer' who resells the supplier's 'products or commodities' unless the allowances are 'available on proportionally equal terms to all other customers competing in the distribution of such products or commodities.'2 Although we have limited our review of this case to one aspect of the alleged § 2(d) violations,3 full understanding of the issues requires a brief exposition of the facts from which the Commission concluded that respondents had induced violations of both §§ 2(a) and 2(d). The relevant facts found by the Commission were not disturbed by the Court of Appeals.

Respondent Fred Meyer, Inc., operates a chain of 13 supermarkets in the Portland, Oregon, area which engage in the retail sale of groceries, drugs, variety items, and a limited line of clothing. In 1957 Meyer's sales exceeded $40,000,000. According to its 1960 prospectus, it made one-fourth of the retail food sales in the Portland area and was the second largest seller of all goods in that area. Since 1936 Meyer has conducted annually a four-week promotional campaign in its stores based on the distribution of coupon books to consumers. The books usually contain 72 pages, each page featuring a single product being sold by Meyer at a reduced price. The consumer buys the book for the nominal sum of 10¢ and must surrender the appropriate coupon when making his purchase of goods. A coupon often represents a reduc- tion of one-third or more from Meyer's regular price for the featured item, and the cover of the 1957 book stated that the use of all 72 coupons would result in total savings of more than $54. The promotional campaign is highly successful. Meyer sold 138,700 books in 1957 and 121,270 in 1958. Aside from the nominal 10¢ paid by consumers for the coupon books, Meyer finances the promotion by charging the supplier of each featured product a fee of at least $350 for each coupon-page advertising his product.4 Some participating suppliers further underwrite the promotion by giving Meyer price reductions on its purchases of featured items, by replacing at no cost a percentage of the goods sold by Meyer during the campaign, or by redeeming coupons in cash at an agreed rate.

The Commission concluded that this promotional scheme, as conducted in the years 1956 through 1958, violated §§ 2(d) and 2(a) in the following respects: First, the $350 paid to Meyer by each of four suppliers participating in the campaigns represented promotional allowances paid in violation of § 2(d) because similar allowances were not made available on proportionately equal terms to competing customers. Second, the additional value given Meyer by these suppliers in the form of discounts, free replacements of goods sold and coupon redemptions amounted to price discrimination prohibited by § 2(a).5 The Commission held that by inducing the suppliers to discriminate in price, respondents had vio- lated § 2(f) of the Act,6 and that by inducing them to grant discriminatory promotional allowances, respondents had engaged in an unfair method of competition in violation of § 5(a) of the Federal Trade Commission Act.7

Both before the Commission and in the Court of Appeals, respondents argued that it was not established that two participating suppliers, Tri-Valley Packing Association and Idaho Canning Company, had violated § 2(d). Meyer purchased directly from both of these suppliers. Tri-Valley participated in the 1957 promotion by paying Meyer $350 for a coupon-page featuring Tri-Valley's brand of canned peaches and by replacing in merchandise every third can sold by Meyer on the coupon's offer of three cans for the price of two. Idaho Canning participated in the 1957 promotion on substantially identical terms, except that the coupon-page it purchased offered three cans of corn for the price of two. The Commission found that two wholesalers, Hudson House and Wadhams & Co., both of which resold to Meyer's retail competitors, had been disfavored in these transactions in that Hudson House had purchased canned peaches from Tri-Valley and both Hudson House and Wadhams had purchased canned corn from Idaho Can- ning but neither of the two wholesalers had been accorded promotional allowances comparable to those received by Meyer. Respondents argued that, purely as a matter of statutory construction, Tri-Valley and Idaho Canning could not have violated the requirement of proportional equality among 'customers competing in the distribution' of their products because (1) Meyer, a retailer, was not 'competing' in the distribution of canned corn and peaches with the disfavored wholesalers, Hudson House and Wadhams, and (2) the retailers found by the Commission to be competing with Meyer in the resale of these products were not 'customers' of Tri-Valley and Idaho Canning but were customers of Hudson House and Wadhams.

The Commission rejected this reading of § 2(d), noting that, if respondents' view prevailed, a retailer buying from a wholesaler and having no direct dealings with his supplier would receive no protection against discriminatory promotional allowances given his competitor who purchased directly from the supplier. The Commission held that § 2(d) prohibits a supplier from granting promotional allowances to a direct-buying retailer, such as Meyer, unless the allowances are also made available to wholesalers who purchase from the supplier and resell to the direct-buying retailer's competitors. Accordingly, the Commission's cease-and-desist order included a provision barring respondents from inducing suppliers to grant them promotional allowances not available to 'customers who resell to purchasers who compete with respondents in the resale of such supplier's products.' 63 F.T.C., at —-. One Commissioner, while agreeing with the majority that respondents had induced Tri-Valley and Idaho Canning to violate § 2(d), dissented in part on the ground that the order should have required the promotional allowances to be made available to the retailers competing with Meyer rather than to wholesalers who resold to them.8 Thus, in his view, the competing retailers were 'customers' of Tri-Valley and Idaho Canning within the meaning of the statute. The Court of Appeals adopted the interpretation of § 2(d) urged by respondents. Consequently, it set aside the portion of the Commission's order set out above.

We agree with the Commission that the proscription of § 2(d) reaches the kind of discriminatory promotional allowances granted Meyer by Tri-Valley and Idaho Canning. Therefore, we reverse the judgment of the Court of Appeals on this point. However, because we have concluded that Meyer's retail competitors, rather than the two wholesalers, were competing customers under the statute, we also remand the case for appropriate modification of the Commission's order. We deal first with respondents' arguments, second with the opinion of the Court of Appeals, and third with the Commission's order.


Respondents press upon us a view of § 2(d) which leaves retailers who buy from wholesalers for the most part unprotected from discriminatory promotional allowances granted their direct-buying competitors. We are told that § 2(d) in specific terms requires this result. To benefit from the statute's requirement of proportional equality, it is urged, a buyer must be a 'competing customer' within the narrowest sense of that phrase. Thus, the wholesalers in this case are not competing customers because they do not compete with Meyer, and the retailers who do compete with Meyer in the resale of the suppliers' products are outside the protection of § 2(d) because they are not customers of the suppliers. For reasons stated below, we agree with respondents that, on the facts of this case, § 2(d) reaches only discrimination between customers competing for resales at the same functional level and, therefore, does not mandate proportional equality between Meyer and the two wholesalers.9 But we cannot accept the second half of this argument, for it rests on a narrow definition of 'customer' which becomes wholly untenable when viewed in light of the central purpose of § 2(d) and the economic realities with which its framers were concerned.

Conceding that the Robinson-Patman amendments by no means represent an exemplar of legislative clarity,10 we cannot, in the absence of an unmistakable directive, construe the Act in a manner which runs counter to the broad goals which Congress intended it to effectuate. See, e.g., FTC v. Sun Oil Co., 371 U.S. 505, 516 521, 83 S.Ct. 358, 365—368, 9 L.Ed.2d 466 (1963); Elizabeth Arden Sales Corp. v. Gus Blass Co., 150 F.2d 988, 991—993 (C.A.8th Cir.), cert. denied, 326 U.S. 773, 66 S.Ct. 231, 90 L.Ed. 467 (1945). We start with the proposition that '(t)he Robinson-Patman Act was enacted...

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