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Universal-Rundle Corp. v. Federal Trade Commission.

October 22, 1965

UNIVERSAL-RUNDLE CORPORATION, PETITIONER,
v.
FEDERAL TRADE COMMISSION. RESPONDENT



Author: Schnackenberg

SCHNACKENBERG, Circuit Judge:

Universal-Rundle Corporation, a Delaware corporation, by its petition asks us to review and set aside an order of the Federal Trade Commission issued on June 12, 1964 and its order issued on August 4, 1964.*fn1

Petitioner is a nationwide manufacturer, distributor and seller of plumbing supplies and equipment, including a complete line of "U-R" brand vitreous china and enameled cast-iron plumbing fixtures. In the sale of its products, petitioner has a wholesaler's net price and also a truckload price which is below the wholesaler's net list price. The truckload price is applicable only to the purchases of a truckload or more of fixtures, and the Commission found that the differentials involved are those averaging 10% between truckload prices and the wholesaler's list prices. A truckload order may consist of any combination of fixtures and the discount rate on such truckload purchases varies from order to order, depending on the list and truckload prices of the individual fixtures at time of purchase. As to petitioner, the situation in Philadelphia, Pennsylvania, was that Mars Supply Company, a large dealer, was the only one which bought in truckloads. In 1957 its four truckload orders amounted to $23,251.23. At petitioner's wholesaler's net price Mars would have paid $25,795.53, indicating a preferential allowance or discount of about 9.9%. On the basis of such testimony the Commission found that Mars competed with nonfavored customers in Philadelphia through its main store and with nonfavored customers in Camden, New Jersey through its branch store, and also that Mars competed with nonfavored dealers in selling directly to the consumer.

The Commission found price discriminations were sufficient "to give the recipients of the lower prices a substantial advantage over their nonfavored competitors" and that such discriminations may be substantially to affect customer competition adversely. In its opinion, and by adopting the examiner's decision as modified, the Commission found that competition in the resale of petitioner's "U-R" brand of plumbing fixtures was keen in the Philadelphia-Camden area; that price was a very important competitive factor in the plumbing-fixture business; that the differentials if reflected in the resale price of the products would have been sufficient to divert business from nonfavored customers to Mars; that the margin of profit in the resale of plumbing fixtures appears to be small; and that a 2% cash discount was essential to a profitable operation. The Commission concluded that under the circumstances "competitive injury may be anticipated if [petitioner's] pricing practices with regard to the sale of its U-R line of products are allowed to continue," and that petitioner's discriminations violated Section 2(a) of the Clayton Act, as amended.

In this court the conflict between the legal theories of the parties may now be stated in abbreviated form.

Petitioner argues that the evidence showed a lack of competition at the retail level, which precludes a finding of a violation, and also that competition is not adversely affected as a result of price discrimination in a situation wherein all buyers are free to avail themselves of the lower prices if they desire to do so. It relies on the fact that the discounts in question were available to any purchaser buying in truckload quantities.

Petitioner further contends the failure of the "favored" buyer to avail itself of the discounts found to be discriminatory on a substantial portion of its purchase is not irrelevant, as it demonstrates the lack of competitive significance of the discounts themselves.

The argument is further advanced by petitioner that the finding of intense price competition at the "dealer" level leading to probable diversion is unsupported by, and contrary to, the evidence, and it is error to infer the probable competitive impact of a truckload discount by comparing it to a cash discount, because such discounts are entirely dissimilar in an economic sense, and that the amount of discrimination between competing purchasers is too insubstantial to support the finding of violation.

The Commission's final order of June 12, 1964 rejected the examiner's finding that petitioner's sales to its Camden, New Jersey customers were in interstate commerce, but in other respects agreed with the examiner and denied the appeal from his order. It modified the initial decision accordingly and then adopted it on June 12, 1964.

This action was promptly followed by petitioner's filing with the Commission on July 20, 1964 its petition requesting that further action be stayed to permit the Commission sufficient time to investigate and institute whatever proceedings are deemed appropriate by the Commission to correct an industry-wide practice by plumbing fixture manufacturers of granting discounts in prices on truckload shipments.

Petitioner there stated:

"* * * Such a stay, when followed by appropriate action by the Commission to place all manufacturers in this industry on the same competitive basis, would avoid the obvious competitive disadvantage and extreme hardship under which respondent [petitioner here] would otherwise have to compete and minimize the probability of any substantial decline in respondent's sales volume which would be a consequence of the Commission's order."

Accompanying the petition were written statements of facts and exhibits indicating that each of the following named competitors of petitioner operates its business on a discount and truckload purchase plan as does petitioner, with however an important exception as to the approximate amount of the average ...


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