The original Robinson-Patman bill was introduced on June 11, 1935,

two weeks after the demise of the NRA. The bill, as drafted by H.B. Teegarden, counsel for the United States Wholesale Grocers Association, 207/ sought to attain an important goal embodied in the NRA codes, the

protection of the three-tier distribution system. The original bill's

proviso to its prohibition on price discrimination reveals that purpose: 208/ [T]hat nothing herein contained shall prevent differentials in prices as between purchasers depending solely upon whether they purchase for resale to wholesalers, to retailers, or to consumers . . nor 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.

This language contemplated a pricing system under which discounts would

be available solely on the basis of a buyer's function in the chain of distribution, that function being defined by reference to the class of customers to whom the purchaser sold goods. Thus, a customer who purchased goods for resale to consumers would, by definition, be classed a retailer and denied a wholesaler's discount. And while the original bill appeared to provide for discounts on account of cost savings, the drafter of the bill contemplated a restrictive interpretation which would require that

207/ Sumners Hearings 9.

208/ Id., at 1.

all of a manufacturer's overhead cost be spread equally over all units produced, thus limiting the amount of the price reduction that could be granted to a purchaser whose order did not utilize all overhead facilities. 209/

The original bill, therefore, would have established a rigidly defined

system of functional discounts but discouraged quantity or other discounts tending to shortcut the traditional chain of distribution.

After the introduction of the Robinson-Patman Bill, and only a

few days after the introduction of a similar companion bill in the Senate, the House Committee on the Judiciary chaired by Representative Sumners began its hearings on July 10, 1935. These hearings were to last but five days. Two bills sponsored by the Federal Trade Commission, implementing the conclusions and recommendations of its six year chain store study, introduced by Representative Mapes, were also assigned to the Sumners' committee. In spite of the FTC's extensive record on the chain store phenomenon, the two Commission-sponsored bills were never considered.

209/

Sumners Hearings 34. The reasoning is demonstrated by attorney Teegarden's explanation of cost justification:

The bill does not permit [a] chain to demand price discounts representing a proportional share of the manufacturer's overhead which it fails to utilize.

For illustration: Suppose manufacturer A maintains

a system of branch sales offices and a corps of traveling
salesmen for the purpose of canvassing and selling to
the wholesale trade, and that the costs of this sales
organization, including its overhead, represents 25 percent
of his gross sales. Suppose then that chain X comes
to A's headquarters office and offers him a large order
for delivery direct to his chain retail outlets
throughout the coming year and demands on that order a
25-percent discount on the plea that it has not required
(footnote continued)

The Sumners committee hearings consisted of a debate between

wholesaler and small retailer organizations on the one hand, 210/ and

(footnote continued)

the services of A's selling organization in any

respect. If the same additional quantity of business

had been sold to A's wholesaler customers it would

have cost him, say, 3 percent more for salesmen's traveling
expenses and perhaps salaries of some additional

salesmen, but otherwise would have been absorbed
under his existing sales overhead.

In such case the chain might be given the 3-
percent discount but not a 25 percent discount. The
manufacturer is not able to abandon his whole selling
organization merely by reason of the order of this
chain, nor is he able to reduce his costs to an
amount representing 25 percent of this chain's
order. He does save 3 percent, however, as compared
with the same amount of business sold to his other
customers, and that 3 percent therefore represents
the difference in cost of sale "resulting from the
differing methods in which such commodities
are as to such purchasers (namely, the chains and
the independents) sold or delivered." If the
manufacturer would feel safe in abandoning his
independent customers entirely and selling only to
chains who called at his headquarters in this fashion,
so that he might abandon entirely his sales organization
and save the 25-percent overhead which it represented,
then he might possibly sell to such chain at 25
percent less than his competitor who continued to serve
the independent trade. But every practical manufacturer
knows that if he should commit himself to such a change
in his sales policy, he would soon cease to be an
independent manufacturer and would become merely the
manufacturing department of some chain organization.
And every chain knows that when it buys in that fashion
it has to bear certain costs of investigation of market
conditions and movements that are otherwise sustained by
the manufacturer through his sales organization.

210/ The problem facing those involved in traditional forms of distribution compelled a natural alliance between small retailers and wholesalers; the wholesaler's fate depended upon the continued survival of his customer, the small retailer. Small retailers, in turn, unable due to their size to engage in (footnote continued)

large retailers and voluntary chains on the other. Of those witnesses

appearing in favor of the legislation, five represented brokers, wholesalers or other middlemen, 211/ and two represented retailer organizations. 212/ The bill was opposed by two large retailers 213/ and one witness representing

a voluntary buying group. 214/

The companion Senate bill, which had lain idle since its June 26,

1935, introduction, was suddenly reported out on February 3, 1936, by the
Judiciary Committee without the benefit of its own hearings. 215/

In its consideration of this bill, the committee
has had the benefit not only of the diligent studies
of its own members, but of the record of hearings on
a similar bill (H.R. 8442) before the Committee on
Judiciary of the House of Representatives, also of the
hearings before a Special Committee on the House on
Investigation of the American Retail Federation, and
of the report of the Federal Trade Commission on its
chain-store investigation (S. Doc. No. 4, 74th Cong.,
1st Sess.). These have developed so fully the facts,
trade and industrial, pertinent to the objects of

(footnote continued)

mass, direct buying, were totally dependent upon their traditional supplier, the wholesaler. Thus the small retailer was often willing to follow the lead of the wholesalers in attempting to protect their mutual interest.

21 H. B. Teegarden and J. H. McLaurin, United States Wholesale Grocers
Association; Paul Fishback, National Food Brokers Association; Horace H. Herr,
National League of Wholesale Fresh Fruit and Vegetable Distributors;
Edgar Watkins, National American Wholesale Grocers Association.

212/ Roland Jones, Jr., National Association of Retail Druggists; John M. Pohlhaus, National Association of Retail Grocers.

213/ Robert E. Wood, Sears, Roebuck & Co.; Charles F. Adams, First National Stores, Inc.

214/ Gerard M. Ungaro, National Voluntary Groups Institute.

215/ S. REP. No. 1502, 74th Cong., 2d Sess. 2 (1936).

the bill, together with representations of all
interested parties for or against its specific
provisions, that this committee has felt able to
reach its decision without the delays of further
hearings.

On the same day, a House Subcommittee chaired by Representative Utterback began the second set of hearings on the House bill. 216/ These hearings were to last but four days. By this time, favorable RobinsonPatman sentiment had crystalized; subcommittee members apparently thought of the further hearings as a forum for drafting a proposal rather than a debate on the merits.217/

Mr. Michener: This is just a continuation of the hearings
that were held; is that correct?

Chairman Sumners: I suppose it is, Mr. Michener.

Mr. Michener:

If that is true, we do not want--we
might as well be frank about it now,
but we do not want people coming in here
with long speeches reviewing the whole
thing.

Chairman Sumners:

Mr. Michener:

That is right.

If they have anything in addition to the
hearings, that is what we would like.
The case has been diagnosed, and it is
the prescription that we want.

In spite of the Utterback Committee's inclination to consider the substantive debate closed, the second set of hearings produced substantial testimony

216/ Hearings on H.R. 4995, H.R. 8442, and H.R. 10486 Before a Subcommittee of the Committee on the Judiciary of the House of Representatives, 74th Cong., 2d Sess. (1936) (hereinafter cited as Utterback Hearings).

217/ Utterback Hearings, 272-73.