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On June 19, 1936, the Robinson-Patman Act became law as an amendment to the antitrust laws. 1/ This Act was intended to prevent monopolization of the distributive process by halting price discrimination which might lead to the disappearance of the independent retailer and wholesaler. Price discrimination was seen not as a normal function of free market forces but as a tool of predatory sellers and buyers seeking to acquire, maintain and exercise monopoly power. The victims of price discrimination were thought to be the small independent retailers; the beneficiaries were thought to be the corporate chains. The basic solution which emerged from the legislative process was a statutory ban on all price discrimination injurious to competition except that justified by costs or the need to

meet a competitive price.

A. The Statute Generally Described

The Robinson-Patman Act has two prohibitory sections, sections 1 and 3. Section 1 amends Section 2 of the Clayton Act and is usually

referred to as Section 2 of Robinson-Patman.

It is the most often

enforced and can serve as the basis for a civil action by the FTC,

1/ Act of June 19, 1936, c.592, 49 Stat. 1526. See text at Appendix B.

the Department of Justice or a private plaintiff.

Section 3 is a

criminal statute which can be enforced only by the Department of

Justice; it repeats some of the prohibitions of Section 2 but also outlaws the sale of goods "at unreasonably low prices for the purpose of destroying competition or eliminating a competitor."

Section 2(a) prohibits discrimination in price by a seller where a sale of commodities of like grade and quality is made in interstate commerce. The prohibition applies only to those price discriminations whose effect "may be substantially to lessen competition or tend to create a monopoly 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."

Section 2(a) provides several defenses to the general prohibition. For example, a discrimination may be defended on the ground that the differential in price makes "only due allowance for differences in the cost of manufacture, sale, or delivery" resulting from differing quantities or methods in sale or delivery. This is commonly referred to as the "cost justification defense." The section also permits discriminations resulting from a changing condition affecting the market for

2

the goods or their marketability.

on obsolete or deteriorating goods.

This allows the seller to cut prices

Section 2(b) provides that after a plaintiff makes out a prima facie case that the discrimination is unlawful, the defendant must then rebut the presumption of illegality. A proviso to Section 2(b) creates a "meeting competition" defense, which permits a seller to rebut the prima facie case by showing that his price reduction was intended to meet a competitor's lower price.

Section 2(c) outlaws certain payments made in lieu of brokerage, and Sections 2(d) and 2(e) prohibit, respectively, the granting of allowances for services or facilities provided by the purchaser, or the furnishing of any services or facilities involved in the processing or handling of the commodity in question, unless such concessions have been accorded "to all purchasers on proportionally equal terms." Unlike Section 2(a), these sections require no showing of injury to competition. Moreover, defenses to a violation of these sections are limited.

Section 2(f) makes it unlawful for a buyer engaged in interstate commerce, in the course of such commerce, knowingly to induce or receive a price discrimination which would be unlawful for a seller to grant.

Under existing liaison agreements between the Department of Justice and the Federal Trade Commission, the FTC has taken primary responsibility for civil enforcement of the Robinson-Patman Act, leaving the Department of Justice with responsibility for criminal prosecutions under Section 3. That section, never intended as a substantive addition to the Act, has rarely been invoked.

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