its supplier of steel wire, granted discriminatory "freight
allowances or rebates" during the years 1962, 1963, and 1964,
to other steel wire purchasers, when those purchasers took
delivery f. o. b. defendant's mill, by means other than common
carrier, without making such payments available to plaintiff
on proportionally equal terms.
Defendant has moved for judgment on the pleadings pursuant
to Rule 12(c) of the Federal Rules of Civil Procedure on the
ground that freight allowances and rebates are not actionable
under Sections 2(d) and 2(e) of the Robinson-Patman Act. We
In American Can Co. v. Russelville Canning Co., (8th Cir.,
1951) 191 F.2d 38, the Court of Appeals for the Eighth Circuit
held directly in point that the payment of a freight allowance
did not constitute the furnishing of "services or facilities"
connected with the processing, handling or sale of commodities
within the meaning of Section 2(e) and that such abuses are
actionable only as "price discrimination" under Section 2(a),
being subject to the cost justification defense outlined
therein. See also New England Confectionery, 46 F.T.C. 1041
(1949), wherein the Federal Trade Commission held that freight
rebates did not fall under the terms of Sections 2(d) and
2(e), and that the "proportionally equal terms" standard of
those sections did not apply; Rowe, Price Discrimination Under
the Robinson-Patman Act, pp. 363-420 (1962).
The correctness of these decisions is made manifestly clear
by an analysis of the legislative history and language of the
Initially, it is clear that Section 2(a) of the Act, upon
which this action was originally based before amendment,
expressly covers such rebates, providing that differentials
which make "due allowance for differences in the cost
of * * * delivery resulting from the differing methods * * * in
which such commodities are * * * delivered," are lawful. In
contrast, not a single mention of "delivery" can be found in
Sections 2(d) and 2(e). When this factor is combined with the
uncontroverted case law holding that the cost justification
defense is applicable only to actions under Section 2(a), F. T.
C. v. Simplicity Pattern Co., 360 U.S. 55, 79 S.Ct. 1005, 3
L.Ed.2d 1079 (1959), it would seem apparent that Congress did
not intend freight allowance differentials to be sued upon
under the instant sections which are not subject to the
defenses made available in Section 2(a). For to hold that they
could be so based, would be to make nugatory the defenses
specifically outlined for this offense.
Further, where statutory provisions are inconsistent, as
here, it is well-settled that specific terms covering the
subject matter, as Section 2(a) with regard to "delivery" will
prevail over more general language in other sections. Kepner
v. United States, 195 U.S. 100, 125, 24 S.Ct. 797, 49 L.Ed.
114 (1904). While there is overlap in the coverage of the
three sections, such overlap cannot be said to control when
"delivery" is specifically provided for in one section and not
in the remaining two.
Moreover, if this Court were to apply Sections 2(d) and 2(e)
to freight allowances, we would be acting in contradiction to
the apparent goal of all anti-trust legislation, by stifling
price competition. See Automatic Canteen Co. v. F. T. C.,
346 U.S. 61, 73-74, 73 S.Ct. 1017, 97 L.Ed. 1454 (1953). That is,
while Section 2(a) provides that price differentials are
lawful absent proof of competitive injury, Sections 2(d) and
2(e) declare certain acts to be per se illegal. Therefore, if
we were to decide that freight rebates were subject to the
latter sections, we would in effect be concluding that buyers
and sellers were no longer free to haggle over basic price
elements, and that proof of competitive injury would no longer
be a prerequisite to recovery.
We submit that the better view is to limit actions on price
differentials, including freight rebates, to Section 2(a), and
to consider Section 2(d) and 2(e)
applicable only to unlawful promotional arrangements connected
with resale, i. e. services unrelated to price. Indeed this
conclusion is demanded when reference is made to the
legislative history of the Act, and statements made by
Congressmen at the time of enactment:
"* * * the existing evil at which this part of
the bill [2(d) and 2(e)] is aimed is, of course,
the grant of discriminations under the guise of
payments for advertising and promotional
services * * *." 80 Cong.Rec. 9418 (1936).
"[the] Committee discussed the bill and the
provisions in paragraph (d) with relation to
advertising allowances, and any member of that
committee will tell you that that section refers
to advertising allowances." 80 Cong.Rec. 8123
See also Nuarc Co. v. F. T. C., (7th Cir., 1963) 316 F.2d 576,
580; Rowe, Price Discrimination Under the Robinson-Patman Act,
supra, at p. 377 (1962).
When plaintiff herein dropped its charges of Section 2(a)
violations by filing its Second Amended Complaint, it did so
to avoid the necessity of proving competitive injury, and to
escape from meeting a cost justification defense. In the
opinion of this Court, plaintiff did not have the opportunity
to make such a choice. Its remedy, if any, for freight
allowance discrimination must fall under Section 2(a).
Sections 2(d) and 2(e) on which it relies are not applicable.
American Can Co. v. Bruce's Juices, Inc., (5th Cir., 1951)
187 F.2d 919 does not support plaintiff's cause as it
supposes. In that case the Court dealing with discriminatory
freight allowance charges brought under Section 2(a) and 2(e)
considered cost justification as a defense, at page 924,
which, as discussed above, is applicable only to Section 2(a)
actions. See F. T. C. v. Simplicity Pattern Co., supra.
Inasmuch as cost justification is not a proper inquiry under
Section 2(e), we must conclude that the Court could have based
its opinion on Section 2(a), alone.
We are satisfied that Congress intended to strike down
freight discriminations which are an element of "price"
only when those discriminations have an adverse effect on
competition or cannot be cost justified as provided for in
section 2(a). The per se unlawfulness of Sections 2(d) and 2(e)
is not applicable.
Accordingly, the motion of defendant for judgment on the
pleadings is granted.
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