Texaco Inc v. Hasbrouck/Concurrence White

by Byron White

Justice WHITE, concurring in the result.

Texaco's first submission urging a blanket exemption for all functional discounts is rejected by the Court on the ground stated in FTC v. Anheuser-Busch, Inc., 363 U.S. 536, 550, 80 S.Ct. 1267, 1275, 4 L.Ed.2d 1385 (1960), that the "statute itself spells out the conditions which make a price difference illegal or legal, and we would derange this integrated statutory scheme" by providing a defense not contained in the statute. In the next section of its opinion, however, the Court not only declares that a price differential that merely accords due recognition and reimbursement for actual marketing functions does not trigger the presumption of an injury to competition, see FTC v. Morton Salt Co., 334 U.S. 37, 46-47, 68 S.Ct. 822, 828-829, 92 L.Ed. 1196 (1948), but also announces that "[s]uch a discount is not illegal." Ante, at 562. There is nothing in the Act to suggest such a defense to a charge of price discrimination that "may . . . substantially . . . lessen competition . . . in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them." 15 U.S.C. § 13(a). Nor is there any indication in prior cases that the Act should be so construed. The Court relies heavily on the Report of the Attorney General's National Committee to Study the Antitrust Laws (1955) and also suggests that the Federal Trade Commission permits "legitimate functional discounts" but will not countenance subterfuges. Ante, at 563.

Thus, a Texaco retailer charged a higher price than a distributor who is given what the Court would call a legitimate discount is entirely foreclosed, even though he offers to prove, and could prove, that the distributor sells to his customers at a price lower than the plaintiff retailer pays Texaco and that those customers of the distributor undersell the plaintiff and have caused plaintiff's business to fail. This kind of injury to the Texaco retailer's ability to compete is squarely covered by the language of § 13(a), which reaches not only injury to competition but injury to Texaco retail customers' ability to compete with the distributor's customers. The Court neither explains why this is not the case nor justifies its departure from the provisions of the Act other than by suggesting that when there is a legitimate discount, it is the distributor's decision, not the discount given by Texaco, that causes the injury, even though the latter makes possible the distributor's discount. Perhaps this is the case if the concept of a legitimate price discrimination other than those legitimated by the Act's provisions is to be implied. But that poses the question whether the Act is open to such a construction.

The Attorney General's Committee noted the difficulty. Under the construction of the Act that the Federal Trade Commission (FTC or Commission) was then espousing and applying, see Standard Oil Co. v. FTC, 173 F.2d 210 (CA7 1949), rev'd on other grounds, 340 U.S. 231, 71 S.Ct. 240, 95 L.Ed. 239 (1951), the Committee said, "[a] supplier according functional discounts to a wholesaler and other middleman while at the same time marketing directly to retailers encounters serious legal risks." Report of Attorney General's National Committee, at 206. The Committee clearly differed with the FTC and called for an authoritative construction of the Act that would accommodate "functional discounts to the broader purposes of the Act and of antitrust policy." Id., at 208. At a later stage in the Standard Oil case, the FTC disavowed any purpose to eliminate legitimate functional pricing or to make sellers responsible for the pricing practices of its wholesalers. The reversal of its position, which the Court of Appeals for the Seventh Circuit had affirmed, was explained on the ground of "broader antitrust policies." Reply Brief for Petitioner in FTC v. Standard Oil Co., O.T.1957, No. 24, p. 32. The FTC also appears as an amicus in this case urging us to recognize and define legitimate functional discounts. Its brief, however, does not spell out the types of functional discounts that the Commission considers defensible. Nor does the FTC cite any case since the filing of its reply brief in 1957 in which it has purported to describe the contours of legitimate functional pricing. Furthermore, the FTC's argument apparently does not persuade the Court, for the Commission recommends reversal and remand, while the Court affirms the judgment.

In the absence of congressional attention to this longstanding issue involving antitrust policy, I doubt that at this late date we should attempt to set the matter right, at least not in a case that does not require us to define what a legitimate functional discount is. If the FTC now recognizes that functional discounts given by a producer who sells both to distributors and retailers are legitimate if they reflect only proper factors and are not subterfuges, I would await a case challenging such a ruling by the FTC. We would then be reviewing a construction of the Act by the FTC and its explanation of legitimate functional discount pricing.

This is obviously not such a case. This is a private action for treble damages, and the Court rules against the seller-discounter since under no definition of a legitimate functional discount do the discounts extended here qualify as a defense to a charge of price discrimination. We need do no more than the Court did in Perkins v. Standard Oil Co. of Cal., 395 U.S. 642, 89 S.Ct. 1871, 23 L.Ed.2d 599 (1969). This the Court plainly recognizes, and it should stop there. Hence, I concur in the result.

Notes