sufficient amounts of furniture, say he buys two carloads in the beginning of each season, or the equivalent thereof, then we would thereafter extend him that better price." He was then asked to be more definite (J.A. 84) : “What's this fifty thousand dollar break-even point that's in this complaint? Is that the difference? You speak of two carloads for each season for each year, and they vary from five to eleven thousand dollars. That leaves me in the air. Do you have a financial level there?" He answered: "We can't judge it exactly by the financial level, but if you had eight carloads of furniture and they were worth between five and eleven thousand dollars, you would be getting approximately fifty thousand dollars worth of furniture each year at least." He was asked: "That means then that the fifty thousand dollars is a break-even point. Is that right?" He answered: "I think you can say that, sir. I would say this that we wouldn't have absolutely a strict interpretation of that. If the man bought right at fifty thousand dollars worth this year and had seventy-five the previous year, we wouldn't knock him off the list, sir." A few moments later the questioning returned to this subject (J.A. 86–7): Question: "Your answer with respect to the fifty thousand dollar figure that the Hearing Examiner mentioned was not quite clear to me. Is that fifty thousand dollar figure utilized as a rule of thumb for a dividing point between who shall get the jobber price and who shall be assigned the carload price?” Answer: "After viewing his purchases you may. That's one standard that can be applied. Yes." Question: "Well, is that applied? What is the fact?" Answer: "Well, we apply a standard like that or judge it by the number of orders in terms of carloads that he has given us from our own records." Question: "But is that, the number of carloads, just another way of describing a customer, who will buy fifty thousand dollars worth approximately?" Answer: "Yes, that's just another way. You can judge it either way, sir." Question: "You come out to about the same?" Answer: "About the same thing. The reason we have to judge it sometimes in carloads, as I say, over a period of time, is because a man may buy one hundred thousand dollars worth of furniture this year and next year may buy over one hundred for several years because of some local condition, or he might buy only forty. But we do not judge him just on that one period of time." This witness clearly claimed that the criterion was sustained annual purchases averaging more than $50,000 per year, with a period of grace thereafter. This was the claim which the Commission tested against the actual performance of representative groups of favored customers over a period of several years, with the result that the Commission concluded that the criterion was not being met by a substantial portion of those customers, and therefore that petitioner's claim that the discount was being granted because of quantityof-purchase savings rather than the reduced sales commissions, was not true. (For a detailed analysis of the matter, see the Commission's brief, pp. 35-38.) This evidence was clearly substantial. Cf. Federal Trade Commission v. Washington Fish & Oyster Co., 282 F. 2d 595, 598 (4th Cir. 1960). In any event, contrary to the court's view, the question was not whether the favored customers were classified as such on the basis of their purchases of 8 carloads per year (at a minimum of $5000 per carload) or on the basis of $50,000 total purchases per year; the crucial question was whether, without regard to the volume of purchases, their 5% differential in price was based upon cost savings other than the 3% reduction in salesmen's commissions. Petitioners submitted three successive cost studies, and succeeded only in proving that the reductions were a necessary source of all or a part of the price discount. The Commission held that a seller may not, in a 2(c) case, cost-justify a discriminatory discount to favored customers by showing it has achieved sav ings derived from reductions in brokerage or other commissions on sales to them (J.A. 35-36). This was obviously correct, for such passing-on of commissions is the essential and dispositive element of the "in lieu of" type of 2(e) violation. The court, however, held that a showing of such cost savings would constitute a defense in a 2(c) case. We think this holding is clear error of law, under the plain language of the statute under the expressed intent of the Congress, under the Broch and other decisions cited, and under unvarying administrative precedent. Transmitted herewith are copies of the briefs, the printed record, and the opinion and judgment of the Court of Appeals. By direction of the Commission. PAUL RAND DIXON, Chairman. ALHAMBRA MOTOR PARTS 9. Alhambra Motor Parts v. F.T.C., 309 F.2d 213 (9th Cir. 1962 ) (a) Court Action: Order affirmed insofar as related to Alhambra's brokerage operations. With respect to warehouse redistribution discount, order set aside and remanded for further proceedings. (b) Commission Action: 1. On January 16, 1963, remanded to hearing examiner for further proceedings. Vote: 5-0. JANUARY 16, 1963. (1) Alhambra Motor Parts, et al. v. Federal Trade Commission, 9th Cir., No. 17,222 (Docket 6889-Alhambra Motor Parts, et al.) Mr. MacIntyre reported his consideration of memorandum of January 2, 1963, from the General Counsel, with reference to the opinion of October 9, 1962, and final decree entered on November 15, 1962, by the United States Court of Appeals for the Ninth Circuit affirming and enforcing in part and setting aside in part the Commission's order in Docket 6889. The General Counsel transmitted draft of order reopening the proceeding in Docket 6889 and remanding the case to the hearing examiner. After consideration, this proceeding was reopened and remanded to Chief Hearing Examiner Earl J. Kolb for such further proceedings as are necessary to comply fully with the opinion and decree of the Court, with the direction that the Chief Hearing Examiner, upon completion of the hearings, issue a revised initial decision based upon the present record and such additional evidence as may be received, and order to that effect was approved and referred to the Secretary for issuance and service upon the parties. VANITY FAIR PAPER MILLS 10. Vanity Fair Paper Mills, Inc. v. F.T.C., 311 F.2d 430 (2nd Cir. 1962) (a) Court Action: Order enforced as modified. (b) Commission Action: 1. On January 15, 1963 directed that certiorari not be sought. Vote: 5-0. JANUARY 15, 1963. (3) Vanity Fair Paper Mills, Inc. v. Federal Trade Commission, 2d Cir. No. 27,562 (Docket 7720-Vanity Fair Paper Mills, Inc.) Mr. Anderson presented memorandum of January 9, 1963, in which he reported his consideration of memorandum of January 4, 1963, from Assistant General Counsel Truly, with reference to the opinion of November 27, 1962, of the United States Circuit Court of Appeals for the Second Circuit modifying the Commission's order in Docket 7720, and directing enforcement of the order as modified. Mr. Truly recommended that certiorari not be sought. After consideration, on motion of Mr. Anderson, it was directed that certiorari not be sought in the above matter. (420) AMERICAN OIL CO. 11. American Oil Co. v. F.T.C., 325 F. 2d 101 (7th Cir. 1963), cert. denied, 377 U.S. 954 (1964) (a) Court Action: Order set aside and Commission directed to dismiss complaint. (b) Commission Action: 1. On January 21, 1964 voted to request Solicitor General to petition for certiorari. Vote: 5-0 2. On April 6, 1964, Commissioners Dixon, Elman, MacIntyre and Reilly ordered General Counsel to request Solicitor General for assistance in obtaining reversal of Seventh Circuit decision in this case. JANUARY 21, 1964. The American Oil Co. v. Federal Trade Commission, 7th Cir., No. 13879, Decided November 19, 1963 (Docket 8183-American Oil Co.) Memorandum of January 20, 1964, from the General Counsel, recommending that the Solicitor General be requested to file petition for writ of certiorari to review the opinion and judgment, November 19, 1963, of the United States Court of Appeals for the Seventh Circuit in the above matter, setting aside the Commission's order in Docket 8183. The General Counsel transmitted draft of letter to Hon. Archibald Cox, The Solicitor General, in accordance with the recommendation. After consideration, the letter to Mr. Cox was amended. The Commission directed that the Solicitor General be requested to petition the Supreme Court for a writ of certiorari to review the opinion and judgment in question, and the amended letter to Mr. Cox, making such request and transmitting pertinent material was approved and ordered forwarded after signature by the Chairman. Mr. Elman requested that his position, as follows, be shown on the letter to Mr. Cox: "Commissioner Elman dissented from the Commission's decision and accordingly does not concur in the substantive views herein expressed. He agrees, however, that the issues involved are sufficiently important in the administration of the Robinson-Patman Act to warrant the Commission in requesting Supreme Court review." Mr. Anderson was recorded as in favor of the foregoing action. APRIL 8, 1964. (1) The American Oil Co. v. Federal Trade Commission, 7th Cir., No. 13879 (Docket 8183-American Oil Co.) Colgate-Palmolive Co. v. Federal Trade Commission, 1st Cir., No. 6145 Letter of April 3, 1964, from Archibald Cox, Solicitor General, Department of Justice, referring to the Commission's letters of January 21, 1964, and February 19, 1964, recommending that Supreme Court review be sought in each of the above cases, and concluding (1) that while the Colgate-Palmolive case has substantial problems, it is an appropriate case for Supreme Court review, and (2) that it would be most unwise to file a petition for certiorari in the American Oil case. On April 6, 1964, Messrs. Dixon, Elman, MacIntyre and Reilly directed the Office of the General Counsel to prepare and transmit to Mr. Cox, after signature by the Chairman, a letter (1) urging Mr. Cox, for the reasons set forth, to assist the Commission in attempting to obtain a reversal of the Seventh Circuit's decision in the American Oil Case, (2) enclosing three copies of the staff's proposed draft of petition, subject to Mr. Cox's revision, and (3) requesting, if Mr. Cox is of the opinion that he cannot assist the Commission in this matter, that he approve the statement on page 20 of the memorandum-"The Solicitor General has authorized the filing of this petition without joining therein". JANUARY 21, 1964. Re The American Oil Co. v. Federal Trade Commission, 7th Cir., No. 13,879; Decided November 19, 1963-FTC Docket 8183. Hon. ARCHIBALD COX, The Solicitor General, Department of Justice, Washington, D.C. DEAR MR. SOLICITOR GENERAL: On November 19, 1963, the United States Court of Appeals for the Seventh Circuit filed its opinion and judgment in this matter setting aside an order to cease and desist issued by the Federal Trade Commission. The Court's decision, the Commission believes, is the result of the application of an erroneous legal standard. The Commission's efforts to enforce Section 2 of the Clayton Act, as amended, may seriously be hampered if this decision stands. For the reasons stated below, we request that a petition for a writ of certiorari be filed. The case arose under Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act (Section 2(a) ; 15 U.S.C. 13(a)). Involved is the question of whether American's discriminations in price between purchasers competing in the resale of its products had the effect prescribed by Section 2(a). The legal question, we believe, that is presented by the Court's opinion is as follows: Whether, as a matter of law, a seller's price discriminations between competing purchasers has the adverse effect prescribed by the statute where the amount of the discrimination is substantial, is directly reflected in the resale price of the product, and results or probably will result in the shift of retail customers from the unfavored purchasers to the favored purchasers. The salient facts are stated by the Court of Appeals. Ten of American's dealercustomers were located in and around Smyrna and Marietta, Georgia, adjoining cities located approximately fifteen miles northwest of Atlanta (slip opinion 2). The pattern of traffic flow between the two cities, and to and from the principal industrial and shopping areas therein, was such that local motorists had ready access to most of these ten American dealers (slip opinion 3). For purposes of gasoline pricing American divided the Smyrna-Marietta area into two areas. Four of American's dealers were located in the Smyrna area and six of its dealers in the Marietta area (slip opinion 3). During a seventeen day period in October, 1958, American discriminated in price favoring its Smyrna dealers over its Marietta dealers by discounts ranging from 3.5 cents to 11.5 cents per gallon of gasoline (slip opinion 3-4). In view of the fact that dealers generally maintain a gross margin of profit of five cents per gallon, the price differences in the dealers' resale pump prices were measured by the amounts of discounts that American afforded its favored dealers over its unfavored dealers (slip opinion 3). The differentials in price were sufficient to divert Marietta purchasers to Smyrna stations (slip opinion 6). There was a preference on the part of some motorists for American's gasolines (slip opinion 6), and customers of unfavored dealers purchased American's gasolines at the stations of favored dealers (slip opinion 7-8). American's price reductions were made in response to a gasoline price war originating in Smyrna when an operator of a major brand station (Shell) posted a pump price meeting exactly the pump price of a station (Paraland) selling an "unbranded or private brand of gasoline" (slip opinion 4). With the assistance of their respective suppliers, other stations in the vicinity selling other "major brands" (Texaco, Sinclair and Gulf), as well as an American dealer (Hicks), lowered their pump prices to match those of the Shell station. (ibid.). As the retail prices of the warring stations dropped, American and the other suppliers of major brand gasoline extended greater discounts to their Smyrna area dealers, thus discriminating against their Marietta area dealers (ibid.). |