Shulton, Inc. v. Federal Trade Commission, 13508.

• Decision Date: 12 July 1962
• Docket Number: No. 13508.,13508.
• Parties: SHULTON, INC., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Seventh Circuit

305 F.2d 36 (1962)

SHULTON, INC., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.

No. 13508.

United States Court of Appeals Seventh Circuit.

May 10, 1962.

On Petition for Rehearing July 12, 1962.

David C. Murchison, Washington, D. C., Howrey, Simon, Baker & Murchison, Washington, D. C., Richard L. Perry, Washington, D. C., for petitioner.

J. B. Truly, Asst. Gen. Counsel, James Mc.I. Henderson, Gen. Counsel, Jno. W. Carter, Jr., Atty., Federal Trade Commission, Washington, D. C., for respondent.

Before SCHNACKENBERG, KNOCH and SWYGERT, Circuit Judges.

On Petition for Rehearing or for Modification of Opinion and Judgment July 12, 1962.

KNOCH, Circuit Judge.

Shulton, Inc., seeks to set aside an order to cease and desist issued by a hearing examiner of respondent, Federal Trade Commission, and adopted by a three to two vote of the Commission.

Petitioner was charged with violation of Section 2(d)¹ of the Clayton Act, as amended by the Robinson-Patman Act. In the course of the proceedings, the hearing examiner ruled as a matter of law that petitioner would not be permitted to prove that petitioner's payments to one of its customers, as an allowance for advertising furnished by that customer (such payments not being made available on proportionally equal terms to other competitive customers) were made individually and in good faith to meet payments of a competitor, pursuant to Section 2(b) of the Robinson-Patman Act.²

The hearing examiner based his ruling on the Commission's holdings in prior cases that the meeting competition defense of Subsection (b) was not available in a Subsection (d) proceedings.

At that time, no court of appeals had ruled on this question. Since then, on November 22, 1961, the U. S. Court of Appeals for the District of Columbia Circuit has decided Appeal No. 16123, Exquisite Form Brassiere, Inc., a corporation, Petitioner v. Federal Trade Commission, Respondent, 301 F.2d 499, wherein the Court held:

"The point of general interest upon this appeal is whether a defense of meeting competition in good faith, described in the proviso in Subsection (b) of the statute, is available in response to a charge of violating Subsection (d). All parties seem to agree that the defense thus described is available in response to charges under Subsections (a) discrimination in price and (e) discrimination in furnishing services or facilities. Is it available to a person charged under Subsection (d)? * * * The parties agree that no court has yet passed directly on this question. * * * The critical words used in the proviso are `the furnishing of services or facilities to any purchaser\'. These are the words which appear in Subsection (e). The words in Subsection (d) are `to pay * * * to * * * a customer * * * as compensation * * * for any services or facilities furnished by * * * such customer\'. (Emphasis added.) While `services or facilities\' are the subject of both subsections, in the one case ((e)) the vendor furnishes them to the customer; in the other they are furnished by the customer and the vendor reimburses him. So that, if careful note is taken of the difference between Subsections (d) and (e), and if Subsection (b) is read quite literally, the language of the statute appears to support the view of the Commission. That is, read thus the statute says that a person can meet competition by directly supplying some but not all customers with services and facilities with which to promote sales, but he cannot meet competition by reimbursing some but not all of his customers for services or facilities they procure in the first place. We think this is an unrealistic reading of the statute."

We agree with this reasoning. The Subsection (b) defense was available to...