United States v. Borden Company (370 U.S. 460)/Concurrence Douglas

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United States Supreme Court

370 U.S. 460

UNITED STATES, Appellant,  v.  The BORDEN COMPANY et al.

 Argued: April 24 and 25, 1962. --- Decided: June 25, 1962

Mr. Justice DOUGLAS, concurring.

This is not a case that involves problems of centralized purchasing by a large enterprise for all its constituent members, where the volume involved reduces the unit cost. We have here purchases by constituent members of chain stores of milk and milk products that will be sold at the particular store. The competitor is not a member of a competing chain or, if it is, the chain of which it is a part is a smaller one. The costs studies here involved have little, if any, relation to centralized management. They in the main pertain to two factors to cost. First, is the volume of sales of milk and milk products to the individual store and the method of payment. Second, the degree to which the store relieves the seller of milk and milk products from the costs of handling the product as it enters the store, of stacking or storing the products, and of returning the empty bottles or cartons.

The changes in the Clayton Act made by the Robinson-Patman Act now before us were made to limit discounts as 'instruments of favor and privilege and weapons of competitive oppression.' S.Rep.No.1502, 74th Cong., 2d Sess., p. 5; H.R.Rep.No.2287, 74th Cong., 2d Sess., p. 9. The allowance by § 2(a) of 'differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered' was explained as follows:

'This limits the differences in cost which may justify price differentials strictly to those actual differences traceable to the particular buyer for and against whom the discrimination is granted, to the different methods of serving them, and to the different quantities in which they buy.

'But such differentials whether they arise in operating or overhead cost must, as is plainly stated in the phrase quoted above, be those resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered.

'This, in its plain meaning, permits differences in overhead where they can actually be shown as between the customers or classes of customers concerned, but it precludes differentials based on the imputation of overhead to particular customers, or the exemption of others from it, where such overhead represents facilities or activities inseparable from the seller's business as a whole and not attributable to the business of particular customers or of the particular customers concerned in the discrimination. It leaves open as a question of fact in each case whether the differences in cost urged in justification of a price differential-whether of operating or of overhead costs-is of one kind or the other. That is, whether or not it answers the above requirements as to differences resulting from differing methods or quantities in which such commodities are to such purchasers sold or delivered.' H.R.Rep.No.2287, supra, p. 10. (Italics added.) While in some cases costs relevant to the issue of discrimination under the Robinson-Patman Act may be computed class by class, the only costs relevant here are those computed store by store. The question of cost of delivery to all stores in the favored chain is irrelevant, because overhead costs applicable to a business as a unit have no bearing on any of the cost formulae presented by this record.

In the case of Bowman Dairy Co., as the Court points out, the company charged all independents for customer service rendered by Bowman's deliverymen whether the independents availed themselves of the service or not. Bowman also charged independents for the time and expense of daily cash collections and for the costs of delays in collecting. These items were charged to independents even though it was not shown that their system of payment was always in cash, rather than by central billings, the system used by the chains.

In the Borden case an independent who purchased substantially larger quantities than the average chain store could not qualify for the discount the chain store obtained. This resulted because the independents were treated as one class, the chain stores as another class. As in Bowman the independents who did not make cash payments were treated as if they did; and they were not given the advantage which the chain stores enjoyed by reason of centralized billing even though they were on a credit basis.

What was said in Champion Spark Plug Co., 50 F.T.C. 30, 43, is relevant here:

'Respondent's cost of doing business undoubtedly varied as among its different customers. All of its selling expenses were not applicable on a proportionately equal basis to sales to all of its customers. However, in the absence of a sound basis for determining the actual cost of selling to particular customers, the sales to each customer must bear their proportionate share of the entire selling expense. A cost justification based on the difference between an estimated average cost of selling to one or two large customers and an average cost of selling to all other customers cannot be accepted as a defense to a charge of price discrimination.'

Where centralized purchasing for many stores takes place, the costs of dealing with the group as a class become relevant to the problem under § 2(a). But where, as here, no centralized purchasing is involved, the store-by-store costs are the only criteria relevant to the § 2(a) problem. Otherwise those with the most prestige get the largest discounts and the independent merchants are more and more forced to the wall.

The case was argued as if the grant of discounts was a natural right and that the Act should be construed so as to make the granting of them easy. The Act reflects, however, a purpose to control practices that lead to monopoly and an impoverishment of our middle class. I would therefore read it in a way that preserves as much of our traditional free enterprise as possible. Free enterprise is not free when monopoly power is used to breed more monopoly. That is the case here unless store-by-store costs are used as the criteria for discounts. This case is thus kin to that in Moore v. Mead's Fine Bread Co., 348 U.S. 115, 75 S.Ct. 148, 99 L.Ed. 145, where the lush treasury of a chain was used to bring a local bakery to its knees. Here, as there, the chains obtain a 'competitive advantage' not as a result 'of their skills or efficiency' but as a consequence of other influences. [*] There pricecutting was the weapon. Here it is the discount. Each leads to the same end the aggrandizement of power by the chains and the ploughing under of the independents. The antitrust laws, of which the Robinson-Patman Act is a part, were designed to avert such an inquest on free enterprise.

Mr. Justice HARLAN, dissenting.


This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).