Federal Trade Commission v. Staley Mfg Co
| Decision Date | 23 April 1945 |
| Docket Number | No. 559,559 |
| Parties | FEDERAL TRADE COMMISSION v. A. E. STALEY MFG. CO. et al |
| Court | U.S. Supreme Court |
Mr. Walter B. Wooden, of Washington, D.C., for petitioner.
Messrs. Carl R. Miller, of Decatur, Ill., and Wm. D. Whitney, of New York City, for respondents.
Respondents, a parent company and its sales subsidiary, are engaged in the manufacture and sale of glucose or corn syrup in competition with others, including the Corn Products Refining Company, whose methods of marketing and pricing its products are described in our opinion in Corn Products Refining Company v. Federal Trade Commission, 324 U.S. 726, 65 S.Ct. 961. Respondents, in selling their glucose, have adopted a basing point delivered price system comparable to that of the Corn Products Refining Company. Respondents sell their product, manufactured at Decatur, Illinois, at delivered prices based on Chicago, Illinois, the price in each case being the Chicago price plus freight from Chicago to point of delivery.
In this proceeding, brought under § 11 of the Clayton Act, c. 323, 38 Stat. 730, 15 U.S.C. § 21, 15 U.S.C.A. § 21, the Federal Trade Commission charged that respondents' pricing system resulted in price discriminations between different purchasers of glucose in violation of § 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, c. 592, 49 Stat. 1526, 15 U.S.C. § 13(a), 15 U.S.C.A. § 13(a). The case was heard by the Commission on stipulations of facts and exhibits, upon the basis of which the Commission ultimately made its findings. Applying the same principles as in the Corn Products Refining Company case, it concluded that respondents had made discriminations between different purchasers in the price of their product; and that respondents were unable to justify the discriminations, as permitted by § 2(b) of the Clayton Act, by showing that they were made 'in good faith' to meet a competitor's equally low price. The Commission accordingly made its order directing respondents to cease and desist from the price discriminations.
On review of the Commission's order, the Court of Appeals for the Seventh Circuit set the Commission's order aside, one judge dissenting. 144 F.2d 221. One of the majority judges did not consider whether t e price discriminations violated § 2(a), but held that in any event they were made in good faith to meet their competitors' price within the meaning of § 2(b). Another concurred in the result on the ground that the Commission had failed to make out a case of unlawful price discrimination, and for that reason he found no occasion to pass upon the merits of respondents' defense. The third judge dissented on the ground that respondents' discriminations were unlawful and not justified by competition. We granted certiorari. 323 U.S. 702, 65 S.Ct. 189.
The principal question for decision is whether respondents, who adopted the discriminatory price system of their competitors, including the Corn Products Refining Company, have sustained the burden of justifying their price system under § 2(b) of the Clayton Act, as amended, by showing that their prices were made 'in good faith' to meet the equally low prices of competitors. A further question is whether there was evidence to support the Federal Trade Commission's findings that respondents, in granting to certain favored buyers, discriminatory prices for their product, did not act 'in good faith' to meet a competitor's equally low price within the meaning of § 2(b) of the Clayton Act.
The Commission found that at all relevant times respondents have sold glucose, shipped to purchasers from their plant at Decatur, Illinois, on a delivered price basis, the lowest price quoted being for delivery to Chicago purchasers. Respondents' Chicago price is not only a delivered price at that place. It is also a basing point price upon which all other delivered prices, including the price at Decatur, are computed by adding to the base price, freight from Chicago to the point of delivery. The Decatur price, as well as the delivered price at all points at which the freight from Decatur is less than the freight from Chicago, includes an item of unearned or 'phantom' freight, ranging in amount in instances mentioned by the Commission, from 1 cent per hundred pounds at St. Joseph, Missouri, to 18 cents at Decatur. The Chicago price, as well as that at points at which the freight from Decatur exceeds freight from Chicago, required respondents to 'absorb' freight, varying in instances cited by the Commission from 4 cents per one hundred pounds at St. Louis, Missouri, to 15 1/2 cents per hundred pounds at Chicago.
The Commission found that this inclusion of unearned freight or absorption of freight in calculating the delivered prices operated to discriminate against purchasers at all points where the freight rate from Decatur was less than that from Chicago and in favor of purchasers at points where the freight rate from Decatur was greater than that from Chicago. It also made findings comparable to those made in the Corn Products Refining Company case that the effect of these discriminations between purchasers, who are candy and syrup manufacturers competing with each other, was to diminish competition between them.
The Commission also found that respondents, during a period of from five to ten days after they advance the prices of their product, customarily permit purchasers generally to 'book' orders or secure options to purchase glucose at the old price, for delivery within thirty days, but that they also have permitted certain favored purchasers to secure additional extensions of time for delivery upon such options. In consequence of these time extensions, the favored buyers were enabled to secure glucose at a lower price than that concurrently being charged to other buyers. In some instances, after a price advance, respondents also made fictitious bookings on which deliveries were later made, at the option of the favored buyers; and in still other cases sales were made to favored purchasers long after the expiration of the booking period. Respondents also book glucose in tank car lots to certain purchasers who lack storage facilities for such quantities; respondents then actually make deliveries in tank wagon lots over a period of many months, during which they are selling to others upon like deliveries at higher prices.
These findings and the conclusion of the Commission that the price discriminations involved are prohibited by § 2(a), are challenged here. But for the reasons we have given in our opinion in the Corn Products Refining Company case the challenge must fail. The sole question we find it necessary to discuss here is whether respondents have succeeded in justifying the discriminations by an adequate showing that the discriminations were made 'in good faith' to meet equally low prices of competitors.
We consider first respondents' asserted justification of the discriminations involved in its basing point pricing system. As we hold in the Corn Products Refining Company case with respect to a like system, price discriminations are necessarily involved where the price basing point is distant from the point of production. This is because, as in respondents' case, the delivered prices upon shipments from Decatur usually include an item of unearned or phantom freight or require the absorption of freight with the consequent variations in the seller's net factory prices. Since such freight differentials bear no relation to the actual cost of delivery, they are systematic discriminations prohibited by § 2(a), whenever they have the defined effect upon competition.
Respondents sought to justify these discriminations before the Commission, by a stipulation detailing the history and use of their present pricing system. From this it appears that in 1920, when respondents began the manufacture of glucose or corn syrup, they found that syrup manufactured by their competitors 'was being sold at delivered prices in the various markets of the United States;' that in Chicago two large factories were manufacturing syrup and delivering it in Chicago at prices lower than prices then prevailing in any other market; and that the delivered price in such other markets was generally equal to the Chicago price plus the published freight rate from Chicago to the point of delivery. Respondents thus found in operation a pricing system which, if followed, would produce exact identity in prices of glucose of the several producers when sold in any city of the United States. Respondents, to gain access to the markets thus established, made their sales 'by first quoting the same prices as were quoted by competitors and then making whatever reduction in price * * * was necessary to obtain business.' When respondents soon found that their product would command and same market price as that of their competitors, they 'adopted the practice of selling at the same delivered prices as (their) competitors, whatever they might be.' Respondents have followed the same practice since June 19, 1936, the date of enactment of the Robinson-Patman Act.
Section 2(b) of the Clayton Act provides: 'Upon proof being made, at any hearing on a complaint under this section, that there has been discrimination in price * * *, the burden of rebutting the primafacie 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 * * * was made in good faith to meet an equally low price of a competitor * * *.'
It will be noted that the defense that the price discriminations were made in order...
To continue reading
Request your trial
-
United States v. United States Gypsum Company
...necessarily changing the seller's price to its other customers." 340 U.S. at 249-250, 71 S.Ct. at 249. In FTC v. A. E. Staley Mfg. Co., 324 U.S. 746, 65 S.Ct. 971, 89 L.Ed. 1338 (1945), the Court provided the first and still the most complete explanation of the kind of showing which a selle......
-
Cemar, Inc. v. Nissan Motor Corp. In USA
...Cemar cites Corn Products Refining Co. v. FTC, 324 U.S. 726, 65 S.Ct. 961, 89 L.Ed. 1320 (1945), and FTC v. A.E. Staley Mfg. Co., 324 U.S. 746, 65 S.Ct. 971, 89 L.Ed. 1338 (1945), for the proposition that discrimination in delivery terms can constitute price discrimination. These cases, how......
-
Federal Trade Commission v. Cement Institute
...v. Federal Trade Commission, 324 U.S. 726, 65 S.Ct. 961, 89 L.Ed. 1320, and in the related case of Federal Trade Commission v. A. E. Staley Mfg. Co., 324 U.S. 746, 65 S.Ct. 971, 89 L.Ed. 1338. As stated in the Corn Products opinion at page 730, of 324 U.S., at page 963 of 65 S.Ct., 89 L.Ed.......
-
Farmington Dowel Products Co. v. Forster Mfg. Co.
...low price of a competitor", 15 U.S.C. § 13(b) (1964), as that phrase was interpreted in Federal Trade Commission v. A. E. Staley Mfg. Co., 324 U.S. 746, 759-760, 65 S.Ct. 971, 89 L.Ed. 1338 (1945). Since the defense was raised, the matter was "necessarily decided" and thus the finding shoul......
-
Federal Price Discrimination Law
...& Gamble Co., 482 F. Supp. 1104, 1107 (W.D. Pa. 1980). 46. See, e.g. , FTC v. Cement Inst., 333 U.S. 683 (1948); FTC v. A.E. Staley Mfg., 324 U.S. 746 (1945); Corn Prods. Ref. Co. v. FTC, 324 U.S. 726 (1945). 47. 324 U.S. 726 (1945). 22 Price Discrimination Handbook for the calculation of f......
-
Table of Cases
...527 (7th Cir. 1974), 28 Freightliner of Knoxville v. DaimlerChrysler Vans, 484 F.3d 865 (6th Cir. 2007), 60, 61 FTC v. A.E. Staley Mfg., 324 U.S. 746 (1945), 21, 22, 40 FTC v. Anheuser-Busch, 363 U.S. 536 (1960), 20, 21, 33, 77 FTC v. B.F. Goodrich, 242 F.2d 31 (D.C. Cir. 1957), 45 FTC v. B......
-
Robinson-Patman Act
...pricing protection to one purchaser but not to a competing purchase can constitute price discrimination. FTC v. A.E. Stanley Mfg. Co., 324 U.S. 746, 750 (1945); Texas Gulf Sulphur Co. v. J.R. Sirplot Co., 418 F.2d 793, 805 (9th Cir. 1969). Robinson Patman Act 251 Courts have not ruled consi......
-
The Robinson–Patman Act and the Supreme Court, 1978-85
...deemed useful when theseller has vague doubts about the buyer's veracity and reliability.6438 U.S. at 456-57.7FTC v. A.E. Staley Mfg. Co., 324 U.S. 746, 759-60 (1945).438 U.S. at 453.9Id. at 670 The antitrust bulletinFirst, the Court suggested that a seller may have receivedreportsofsimilar......