integrated wholesaling-retailing operations as a threat to their survival. Similarly, the independent retailer feared the ability of multi-store firms to bargain more successfully with suppliers and feared their ability to pool the operating profits and losses of several stores in several geographic areas. Thus, occurring simultaneously were a revolution in distribution and a great depression. The former was a positive force, the latter a negative one. But each joined in the creation of a common effect: the destruction of the small businessman's sense of

present and long-term security and the universal perception of the loss of fundamental American values.

In the area of food retailing, the coming of the supermarket in the early 1930s added to the fear of the small grocer, because it implied the coming of physically-different food

stores which were often more attractive to the consumer and

with which existing retailers in their smaller stores could
not compete. In response to these honest fears, the
Robinson-Patman Act and other legislation was enacted 308/
to reduce the natural competitive advantages of chain stores.
As introduced, Robinson-Patman was designed to neutralize
two advantages of the chain store. First, its section on

308/ For a more complete discussion of legislative responses to the development of chain stores, see chapter III (B), supra, p. 108.

on customer classification (later to be dropped in the legislative process) and its prohibition on payments in lieu of brokerage, both taken from NRA Codes of Fair Competition, were designed to inhibit vertical integration by retailers into the wholesaling function, thus preserving the existing classes of middlemen. Second, the general prohibitions of discrimination which would adversely affect the status of a "competitor" were designed to forbid larger buyers from using their superior bargaining power to reduce manufacturers' prices to them.

One of the more startling discoveries about Robinson-Patman

is that for all its regulatory interference with short-run pricing it really does not appear to be helping small business; the growth of larger firms in the retailing trade has not been significantly retarded. In the grocery business, for example, the percentage of sales represented by chains of four or more stores has grown from 36.7 percent in 1939 to 51.9 percent in 1963 to 62.7 percent in 1972. For chains of 11 or more stores, the percentages of sales was 34.4 percent in 1948, 47.0 percent in 1963, and 57.0 percent in 1972. 309/ The fundamental reason for this lack of success cannot be attributed to ineffective Robinson

Patman enforcement, since this period of growth of multi-unit retailing establishments included the era of greatest Robinson-Patman Act enforcement by the Federal Trade Commission. Moreover, the continuous threat of private treble damage actions under Robinson-Patman, particularly in food industries, may inspire more pricing caution in sellers than possible government enforcement. The basic problem with Robinson-Patman

is that it does not and cannot deal with the numerous other factors, some more important than discrimination in the cost of goods purchased, which determine the success or failure of particular businesses. And it is, of course, the process of exit and entry by individual businesses which cumulate into the share of the business done by independent retailers and by multi-unit establishments as a class.

309/ 1966 FTC FOOD STUDY, note 105, supra, Table 9 at 300; 1972 CENSUS OF RETAIL TRADE, SUBJECT SERIES, ESTABLISHMENT AND FIRM SIZE (RC-72S-1), Table 2a (1975).

Thus, in order to answer the question whether Robinson-Patman

can actually "protect" the individual small businessman--and it is the individual, small business Congress has really desired to protect--one must evaluate the actual likelihood that a law dealing with one factor affecting competition can really have much impact on the long-run

success or survival rates of small businessmen as a class.

Retailing, as previously discussed, is a dynamic sector of the

economy. As business institutions evolve, as consumer buying habits change, and as the economy as a whole experiences its ups and downs, businessmen are continually placed under pressure; some survive and some do not, often with little regard to differences in the cost of goods purchased. In order to evaluate the ability of Robinson-Patman,

or any other price discriminations statute to serve the Congressionally enunciated policy of preserving and enhancing small business, the

policy maker must first take a realistic look at the American distribution system. For if there is no significant public benefit which may be achieved in the pursuit of this goal, it cannot be used to balance the

substantial cost of Robinson-Patman.

A realistic view of retailing shows that its entire structure is changing from the model of independent manufacturers, wholesalers, and retailers which characterized the distribution sector in the early 1930s. For example, "vertical marketing systems" have emerged as the dominant organizations for selling goods: 310/

310/ Davidson, supra, note 299, at 421-22.

Conventional marketing systems are being rapidly
displaced by vertically organized marketing systems
as the dominant distribution mechanism in the economy.
Conventional channels are those fragmented networks in
which loosely aligned and relatively autonomous manu-
facturers, wholesalers, and retailers have customarily
bargained aggressively with each other, established
trade relationships on an individual transaction basis,
severed business relationships arbitrarily with
impunity, and otherwise behaved independently.

Vertical marketing systems, by way of contrast, consist of networks of horizontally coordinated and vertically aligned establishments which are managed as a system. Establishments at each level operate at an optimum scale so that marketing functions within the system are performed at the most advantageous level.

They

Analysts have described three types of businesses as suitable for operation as vertical marketing systems. 311/ The first, corporate systems, are generally out-growths of chain store organizations. become vertical marketing systems when they take over not only their own wholesaling and internal distribution functions, but also certain manufacturing functions as well. Similarly, some manufacturers in the clothing, paint, and tire industries also own retail outlets. According to one source, Sears, Roebuck obtains 50 percent of its merchandise from manufacturing facilities in which it has an equity interest; many supermarket chains obtain 15 percent to 20 percent of their merchandise from their own manufacturing plants. 312/ Major chain organizations, those having 11 or more units, and the greatest

311/ See Davidson, supra note 299, at 422-23, KOTLER, supra note 303 at 558-60.

317 McCammon, Perspectives for Distribution Programming, in VERTICAL MARKETING SYSTEMS 45 (L. BUCKLIN ed. 1970), quoted in KOTLER, supra note 303 at 559-60.