Business & Finance: Act in Action

Signed by President Roosevelt last June were a series of amendments to the Federal anti-trust laws. These amendments, written in three short pages of text, constitute the so-called Robinson-Patman Anti-Price Discrimination Act, most discussed, least understood piece of business legislation passed during the last session of Congress. In the months since the Robinson-Patman Act became the law of the land, it has grown into a top-flight topic for lay and legal speakers, the subject of countless tracts, booklets, pamphlets, articles, opinions, analyses, and a prime source of worry to most of the country’s businessmen. On the law’s philosophy, constitutionality, interpretation there is nothing except confusion and disagreement. Vastly interested were business observers, vastly annoyed were the defendants, when last week the Act went into action for the first time.

In general the Robinson-Patman Act puts the beneficiaries of discrimination on the same footing as the donors; transfers the burden of proof from the prosecution to the defense; attempts to substitute specific prohibitions for the generalities on price discrimination contained in the old anti-trust laws.

Specifically outlawed are such practices as charging different prices for the same or similar goods unless justified by actual differences in manufacturing, transportation or selling cost (aimed at the practice of selling the same product under different names, at different prices), giving or taking special considerations except for services rendered (aimed at commercial bribery as well as at the agent who is in fact a principal), offering services, facilities, rebates not available to all on “proportionately” equal terms (a provision hitting at special Allowances for advertising).

Administration of the Robinson-Patman Act is in the hands of the Federal Trade Commission, custodian of the Clayton Act which the new law amends.* Hampered by lack of funds, the Commission has been desperately trying to set up administrative machinery for a measure which conceivably might require an NRA staff to enforce it. Not until last week did the Commission get around to cracking down on five corporations in three complaints affecting two homely commodities.

Cheese was one of them. To the astonishment of Board Chairman James L. Kraft of Kraft-Phenix Cheese Corp., the Commission decided that his price lists were discriminatory. Hurt, the cheese man declared: “The prices and discounts now offered were established in a bona fide attempt to comply with the law and in our opinion do comply if any commercially practicable price policy can do so.”

The Commission went out of its way to explain with regard to the Kraft charge that “no allegation is made . . . of bad faith or any subterfuge or secrecy on the part of the respondent in connection with its price policy.” Open to all Kraft customers is a series of discounts from list prices varying with quantity purchased and method of delivery. On Kraft’s loaf cheese a grocer gets 1¢ per lb. off if he buys in lots of from 30 lb. to 149 lb., another 1¢ for lots of from 150 lb. to 749 lb., and on up. On packaged cheese and salad products Kraft allows a 5% discount on orders amounting to $5 or more and requiring only one delivery. To group buyers or chainstores contracting for at least $100 worth of Kraft products per week, delivered at separate stores but requiring only one bill, Kraft also allows a 5% discount. In no case, to either chains or independents, is the discount more than

Nevertheless, that means that a little delicatessen keeper might pay more for his cheese than a chain. And by the Commission’s reading of the law such a state of affairs has led or will lead to a substantial lessening of competition in the U. S. cheese market. If the Commission has its facts straight, it is up to Kraft to prove that its discounts are justified by savings on the larger orders, or that cheese competition has not been affected by its discounts. On virtually the same grounds the Commission also issued a complaint against Shefford Cheese Co. of Syracuse, N. Y.

Rugs were the other concern of the Federal Trade Commission last week. It complained that Bird & Son, Inc. and a subsidiary were selling floor coverings to Montgomery Ward & Co. at lower prices than to independent retailers. As a beneficiary of the alleged discrimination Ward was also cited.

According to the Commission the best price that a retailer could get from Bird on a certain type of rug was $4.24 in lots of 100 rolls or more. Ward got them for $3.64 in carload lots. Even when delivered in small lots to Ward’s retail stores the price was only $3.82. Independent wholesalers, however, got practically as good terms as the big mail order house.

Ward’s President Sewell Lee Avery had no comment to make on his end of the rug case but President Benjamin H. Roberts of Bird & Son declared: “The transaction involved in this case was made prior to the passage of the Robinson-Patman act. . . . Bird . . . has exercised great vigilance in endeavoring to observe this law and avoid any controversy. The issue in the case is of such a character as to probably clarify some doubtful provisions of this law.”

The issue presented in the Ward-Bird complaint did indeed raise some knotty problems for U. S. merchants and manufacturers. In some cases big buyers may be driven even further into their own manufacturing operations. In others the manufacturers may have to choose the type of customer they intend to sell to, for the law seems to preclude the wide price differential necessary to retain both a wholesale and a retail trade.

* One of the most confusing features of the Robinson-Patman Act is a separate criminal section which is inconsistent with the rest of the law and administered by the Department of Justice.