The rebuilding and sales of the three aforementioned automotive replacement parts involves the exchange of the old unit being replaced, which is referred to as the "old core." This enables the rebuilder to reuse various parts, primarily the casing, in the rebuilding process. This means, of course, that the old cores must be transported from the jobber back to the manufacturer and this function, we are advised, is normally performed by the warehouse distributor. It is this transportation of the old cores from the jobber to the manufacturer which prompted this request for an advisory opinion. According to the requesting party, it is the warehouse distributor's job to transport the old cores from the jobber to the manufacturer. But at least one warehouse distributor (Michigan Parts Warehouse, 402 East Carroll, South Bend, Indiana) is having the manufacturer (Automotive Armature Co., Inc., of Mooresville, Indiana) perform this function. It is the requesting party's position that this function should be performed by the warehouse distributor, and that the rebuilder in this case (Automotive Armature Co., Inc.) is performing this function as a wedge to gain new customers. Without citing the reasons. the requesting party contends that such a practice is illegal and would like to see it stopped. On the other hand, if the practice is legal the requesting party would like to be so advised because it contemplates engaging in the same practice for competitive reasons. If the problem is as clear as indicated above, i.e., the pick-up service is in fact actually performed by the warehouse distributor and the rebuilder merely acts as a substitute for the warehouse distributor in picking up the old cores from the jobber, there would be little doubt about the answer to the problem. Under these circumstances, the proposed practice would be lawful as long as it is performed in accordance with the requirements of Section 2(e) of the amended Clayton Act. This provision of the law makes it unlawful for a supplier to furnish services connected with the processing, handling, or sale of a commodity to one purchaser upon terms not accorded to all competing purchasers on proportionally equal terms. Although we have not been able to locate any specific precedent on the point, it is our belief that the transportation of such worn and defective automotive parts by the manufacturer would constitute a service connected with the processing, handling and sale of such products, as contemplated within the purview of Section 2(e). The transportation of such products from the jobber to the manufacturer is a service which is normally performed by the warehouse distributor and is an essential factor in the automotive replacement market relating to the sale of rebuilt parts. Therefore, even though the manufacturer elects to transport the defective parts from the jobber to his own factory for rebuilding, it is still a service nonetheless which is connected with the processing and sale of automotive parts and any service performed in this regard by the manufacturerer must therefore comply with the requirements of Section 2(e). While not specifically in point, nevertheless we believe that the consent order in Docket C-226, Diaperwite, Inc., et al (1962), may provide some helpful guidance in connection with this matter. In that case, respondents were charged with violating Section 2(e) because they furnished a sample of a cleaning compound "without charge and with freight pre-paid" to some customers and the offer was not made available on proportionally equal terms to all competing customers. Thus we believe it is clear that the case involved two factors, namely, the furnishing of a free sample and the payment of freight costs incurred in the delivery of the free sample. Based upon the above-quoted language, which is taken from paragraph nine of the complaint, we think it is reasonably clear that the Commission intended to treat the payment of the freight costs of the free samples as a service within the scope of Section 2(e). Under these circumstances, therefore, we conclude that the manufacturer who picks up old cores from jobbers and ransports them back to his factory for rebuilding is performing a lawful service for his warehouse distributor, provided he accords the service on proportionally equal terms to all of his competing warehouse distributors. But neither the problem nor the solution is quite as simple as has been indiated because there are a number of unanswered questions with respect to our understanding of the real relationship which exists between the rebuilder, the warehouse distributor and the jobber. Some of the unanswered questions that we have not been able to resolve in a telephone conversation with the requesting arty are: Does the rebuilder or the warehouse distributor grant the credit for he old cores? Does the rebuilder place a limitation on the number of old cores which may be returned? Does the rebuilder require a copy of the jobbers' nvoices? In addition to the unanswered questions, the requesting party submitted the "return" plan of a warehouse distributor (Michiana Parts Warehouse) which car be interpreted as offering its jobber customers the option of: (1) Allowing the rebuilder to pick up old cores without qualification; and (2) Permitting the jobbers to return the old cores to the warehouse dis tributor, subject to various specified conditions. These provisions of the "return" plan, coupled with the unanswered questions outlined in the preceding paragraph, merely serve to emphasize the point that the exact relationship between the parties has not been clearly delineated. In the absence of a precise understanding of the factual relationship that exists between the parties, which the requesting party has not been able to clarify for us we believe there is a very real possibility that the rebuilder may in fact be performing the service for the jobber, rather than for the warehouse distributor, within the principle enunciated by the Supreme Court in FTC v. Fred Meyer, Inc., et al., Docket 7492, March 18, 1968. If such is the case, and we believe it is a possibility which must be guarded against in this particular situation, we have added a caveat to the advisory opinion to cover the problem. In short, we have added a phrase which requires the rebuilder to offer the pickup service to all competing jobber customers of his warehouse distributor on proportionally equal terms, if the rebuilder performs this service for one of his customer jobbers. RECOMMENDATION Accordingly, it is recommended that the Commission give its approval to the practice in question, provided it otherwise complies with the requirements of Section 2(e) of the amended Clayton Act. A letter to this effect prepared for the Secretary's signature is attached hereto. Respectfully submitted, PAUL A. JAMARIK, Attorney-Adviser, Division of Advisory Opinions, (For Francis C. Mayer, Chief, Division of Discriminatory Practices, Burcas of Restraint of Trade.) AUGUST 16, 1968. Digest approved for publication. WILLIAM F. JIER, Director, Office of Information. ADVISORY OPINION DIGEST NO. PERFORMING PICK-UP SERVICES FOR WAREHOUSE DISTRIBUTOR The Commission announced today it had rendered an advisory opinion to a manufacturer of rebuilt automotive replacement parts concerning the legality of certain pick-up services which the manufacturer intends to perform and which are allegedly performed by the warehouse distributor. Specifically, the question was raised as to the permissibility of the matt facturer picking up and hauling old cores from the jobber customers of the ware house distributor back to the manufacturer's plant. In the opinion which was rendered, the Commission ruled that the practice is question would be lawful, provided it is a service which the rebuilder renders for the warehouse distributor and not for the jobber. Stating that the practice in question must comply with the requirements of Section 2(e) of the amended Clayton Act, the Commission said: "This provision of the law makes it unlawful for a supplier to furnish services connected with the processing, handling, sale or offering for sale of a commodity to one purchaser upon terms not accorded to all competing purchasers on proportionally equal terms. The transportation of such worn and defective parts by the manufacturer would constitute a service connected with the processing, handling and sale of rebuilt automotive products, as contemplated within the purview of Section 2(e). Under these circumstances, therefore, the Commission is of the opinion that the manufacturer who picks up old cores from jobbers and transports them back to his factory for rebuilding is performing a lawful service for his warehouse distributor, as long as he makes the service available on proportionally equal terms to all of his competing warehouse distributors." On the basis of the facts presented, it was not absolutely clear to the Commission as to whether the service is one which is in fact performed for the warehouse distributor or the jobber. Because of this uncertainty, the opinion contained the following caveat: "If, because of the relationship which exists between the parties, the service is one which the rebuilder in fact performs for one jobber, then the law requires the rebuilder to offer the service to all competing jobbers on proportionally equal terms." Note: In conformity with Commission policy concerning publication of digests of advisory opinions, this news release is the only material of public record. The advisory opinion itself and all background papers are confidential and are not available to the public. FEDERAL TRADE COMMISSION, GROSS AUTO ELECTRIC, INC., Pinconning, Mich., July 18, 1968. DEAR SIR: I would like to have your ruling pertaining to selling to a warehouse distributor and yet the manufacturer do all of the work or part of the work for the warehouse distributor. An example of this is selling to the warehouse distributor and then sending the factory's own truck around to pick up he old cores. We sell to some warehouse distributors and have been approached on this same program, but we have always contended that it has been against the fair trade practice to do this, and we have never done it. Enclosed you will find a policy of the program set up by Automotive Armature Company, Incorporated of Mooresville, Indiana who is doing this. If it is llegal, I would like to see it stopped immediately. If it is not illegal, please vrite me and let me know. Subject: Stock Adjustments, Defectives and Core Returns. We want to process your returns, both new stock and cores, as quickly as ossible. To do this we need your assistance. By following the requirements utlined below you will enable us to process your returns quickly and accurately. NEW STOCK A jobber who buys from us and follows our inventory suggestions will never ose money on slow moving or obsolete merchandise. To insure this, a designated onth has been established for the return of each line, as shown on the enclosed chedule. During this month, we will accept for full credit, merchandise our ustomers wish to return-provided the return is written up on our invoice, rior authorization is given and an offsetting order is received at the time f the return. If a jobber is buying from several sources, we will accept a reirn of up to 3% of his past year's purchases on a no-handling charge basis. 11 other stock returns will be subject to a handling charge. (This policy does ot apply to "changeover" merchandise. Changeover policies will be covered writing, on an individual basis at the time the changeover is made.) DEFECTIVES Defectives may be returned to the warehouse at any time. No prior authorization is required, but we must be furnished a copy of the jobbers invoice listing the defective items, and all defectives must be tagged or boxed so as to be easily identified by part number. In the case of batteries, they must be tagged with the jobber's name and accompanied by the manufacturers warranty form. Merchandise which is to be repaired and returned, such as equipment, must be tagged with the jobber's name. CORES We will accept cores for credit by line up to the amount purchased from us during the prior twelve-month period. No credit will be given for excess cores returned to us. Please keep in mind that stock adjustments directly affect the amount of cores eligible for return. In general, all core returns must be accompanied by a copy of the jobbers invoice listing the core by part number of value. Specific core return requirements are shown on the attached page. We will attempt to process all core returns made by the 20th of the month so that they appear on the month's statementcore returns received after the 20th of the month will appear on the next month's statement. Automotive armature Cores will be picked up at least once a month by the factory and should not be returned to the warehouse. It isn't necessary to identify them in any way. (Wher defectives are returned to the factory, they should be plainly marked.) Accurate Customers handling Automotive Armature should return their Accurate cores to the factory as designated above. If Accurate cores are returned to the ware house, they must be tagged or boxed and listed by value. Airtex It isn't necessary for these cores to be identified by the jobber. Detroit Cores must be tagged or boxed so they are easily identified by part number. Delco carburetor Cores must be tagged or boxed so they are easily identified by part number. Ennis Cores must be tagged or boxed so they are easily identified by part number. Re File No. 693 7024. Mr. CARLTON A. GROSS, President, Gross Auto Electric, Inc., DEAR MR. GROSS: This reply is in response to your letter of July 18, 1968. requesting an advisory opinion as to whether it would be permissible for a mane facturer of rebuilt automotive replacement parts to pick up and haul old cores from the jobber back to the manufacturer's plant. It is alleged that this service is normally performed by the manufacturer's warehouse distributor. The Commission has given careful consideration to your request and it has concluded that the proposed practice in question is lawful, provided it is a serv ice which the rebuilder renders for the warehouse distributor and not for the jobber. Basically, the practice in question must comply with the requirements of Section 2(e) of the amended Clayton Act. This provision of the law makes i unlawful for a supplier to furnish services connected with the processing, hardling, sale or offering for sale of a commodity to one purchaser upon terms accorded to all competing purchasers on proportionally equal terms. The tras portation of such worn and defective automotive parts by the manufacturer would constitute a service connected with the processing, handling and sale of rebuilt automotive products, as contemplated within the purview of Section 2(e). Under these circumstances, therefore, the Commission is of the opinion that the manufacturer who picks up old cores from jobbers and transports them back to his factory for rebuilding is performing a lawful service for his warehouse distributor, as long as he makes the service available on proportionally equal terms to all of his competing warehouse distributors. It is not absolutely clear to the Commission as to whether the service is one which is in fact performed for the warehouse distributor or the jobber. If, because of the relationship which exists between the parties, the service is one which the rebuilder in fact performs for one jobber, then the law requires the rebuilder to offer the service to all competing jobbers on proportionally equal terms. By direction of the Commission. JOSEPH W. SHEA, Secretary. Re An Evaluation of the Effects of the Orders Issued Under the RobinsonPatman Act. FOR INFORMATION ONLY From: James M. Nicholson. To: Comm. Dixon; Comm. Elman; Comm. MacIntyre; Comm. Jones; Secretary; General Counsel; Program Review Officer; Bur. of Economics; Bur. of Restraint of Trade; Bur. of Deceptive Practices; Bur. of Industry Guidance; Bur. of Textiles and Furs; Executive Director; Assistant Executive Director; Division of Compliance. Since I first joined the Commission I have been interested in the efforts of younger staff people to shake Commission complacency and some of our more parochial attitudes. Accordingly, when my office recently learned that two attorneys in the Compliance Division have been preparing an evaluation of the effects of Commission orders issued under the Robinson-Patman Act, my office requested and was given a copy. This report by Robert Field and Henry Banta is extremely stimulating and provocative. These attorneys should be commended for their imaginative and scholarly work which contains much food for thought. A copy is attached. MEMORANDUM To: Director, Bureau of Restraint of Trade. From: H. Robert Field, Henry M. Banta, Attorneys, Compliance Division, Bureau of Restraint of Trade. Subject: An Evaluation of the Effects of the Orders Issued Under the RobinsonPatman Act. INTRODUCTION AND SUMMARY OF CONCLUSIONS It is our purpose here to make some beginning toward an effort to evaluate the effect of some one thousand Robinson-Patman Act orders issued by the Commission over the past thirty-three (33) years. At the outset however we feel it important to affirm our commitment to the basic purpose of this as of our other antitrust statutes. We believe monopoly to be an unmitigated social, political and economic evil and consider its prevention and elimination to be required by any decent concept of a just society. But commitment to the principles is not necessarily commitment to all that is done in its name; great principles, honored with lip service and supported with ineffective measures, breed a singularly destructive cynicism. It is not the justness of the fight we are about to consider, but the choice of weapons. We conclude: (1) That there is no satisfactory evidence that price discrimination is significantly related to the general phenomena of concentration in American industries; (2) that there is no persuasive evidence that the Commission's enforcement of the Robinson-Patman Price Discrimination Act has had any significant affect on either the structure, conduct or performance of any important American industry; (3) that, given the severe budget limitations faced by the Commission and the very high yields associated with enforce |